A Rare D.C. 'Unicorn' with an Old-School Look

SMITH BRAIN TRUST — Appian Corp., a Reston, Va.-based maker of customized software for companies, made the news recently with the revelation that that it had reached enviable "unicorn" status. Based on private-equity valuations, it joins the club of pre-IPO businesses worth — in theory at least — $1 billion. The announcement led to some bragging by boosters of the business culture in Washington, D.C.

But Jonathan Aberman, an adjunct professor at the University of Maryland's Robert H. Smith School of Business and managing director of the McLean, Va.-based venture-capital firm Amplifier Ventures, says that what makes Appian noteworthy is not its unicorn status, per se — which is not based on trading on the public markets, and so is debatable — but the company's business model.

"Appian is notable because it's an example of an old-school software company," Aberman says. "You build a product, sell the product, grow the market, sell the company." So many Silicon Valley companies like Uber and Lyft "are really more about network effects than they are about technology. And making money is something to be worried about after." One reigning Silicon Valley mantra has been: Build an audience and the revenue will follow. But as companies like Twitter struggle, it's becoming clear that that formula is hardly a lock, and some IPOs are being delayed. Appian, in contrast, has been profitable from its first year and had $100 million in revenue in 2015. The solidity of that model becomes more attractive when investors perceive bubbles elsewhere.

Appian's specialty is customized software. Its clients can build tools they need out of modules provided by Appian, often using intuitive interfaces. It has created an app marketplace for often-used tools. Its competitors include Salesforce.com, IBM, and Oracle — a formidable group — and precisely because it competes against such high-profile companies, one of Appian's board members, Harry Weller, a general partner at New Enterprise Associates, has said it's time for Appian's leaders to shed the stealth approach and announce themselves to the world. "Being the secret darling only works for so long," Weller said.

Similarly, Aberman wants to announce the vibrancy of the D.C. startup scene to the world. Nationally, the D.C. region gets only about 2 percent of the venture capital in the United States, or $1.5 billion annually. "It's higher in Boston, it's higher in Los Angeles, Austin, North Carolina," Aberman says. "Still, when you look at the Inc. 5,000 list of the fastest growing companies, we are always at the top of the list."

Aberman says people spend too much time focusing on venture capital as a measure of growth. "We have an active group of entrepreneurs who are good at creating revenue," he says.