Aryaka plans IPO in 2018, aiming more than $1 billion valuation for its cloud based networks

Aryaka, a provider of cloud-based private networks for companies, plans to go public in 2018, aiming for a valuation of more than $1 billion, Chief Executive Shawn Farshchi said.  Aryaka, which helps enterprises connect branch offices around the world, expects annual recurring revenue of $50 million by the end of 2016, doubling to $102 million by the end of 2017, Farshchi said. Revenue in 2015 was about $24 million. The company, whose more than 500 customers include audio products maker Skullcandy, fashion house Gucci and Air China Ltd, expects to be profitable by mid-2017, the CEO said. “We will be ready within next 18 months and then we will wait for the right market conditions to go public,” Farshchi said in an interview. As more software companies offer services on the cloud, businesses are ditching public networking services provided by telecommunication companies and are adopting private cloud-based networking systems provided by companies such as Aryaka. “Traditional networking approaches … offer very limited connectivity to cloud services,” Ashwath Nagaraj, founder and chief technology officer of Aryaka, told Reuters. Investor appetite for cloud-related IPOs was underscored last month when data storage company Nutanix Inc’s shares more than doubled in their first day of trading, even though the company has never made a profit. Nutanix is valued at about $4.5 billion. Aryaka - which Farshchi describes as “a unicorn in the making” - has some way to go to match that. Based on six to 10 times recurring 2016 revenue, the company is worth between $300 million and $500 million. According to research firm IDC, the software-defined networking market is likely to be worth about $6 billion in revenue in 2020. Milpitas, California-based Aryaka received $16 million in funding in March last year, led by Nexus Venture Partners, which joined existing investors Trinity Ventures, InterWest Partners, Mohr Davidow Ventures and Presidio Ventures. Aryaka has partnered with network service providers in Europe, China, Israel, Malaysia and South Korea to offer its services and is in talks with companies in India and Singapore to form partnerships. “Telcos are our best friends actually … they should realize that and partner with us,” Farshchi said. Reuters