OneStream Inc.’s rise to a technology “unicorn” is remarkable for at least two reasons. First, the company is native to Michigan, which remains a relative backwater when it comes to producing digital-tech startups, even as the state sits in a commanding position in automotive, manufacturing, and many other sorts of technology.
Second, OneStream’s rise from birth to the subject of a $490-million initial public offering in July came over the course of 12 years, with that relatively long arc of time befitting the conservatism of the financial-services industry that spawned it. OneStream, based in downtown Birmingham, wasn’t like, say, a company creating generative-AI programs that went from garage status to world-beater in a manner of months.
“The first milestone was taking the idea and getting one customer to pay you for it,” says Tom Shea, the company’s co-founder and CEO, about the approach OneStream took to building its business. “Then you get that success to build the next three customers, and the next 10 customers.”
It’s probably a Michigan hallmark that one of the state’s outstanding software plays, and one of just a handful of startups ever to reach a valuation of $1 billion or more, is a relatively conservative outfit. OneStream is known for fostering an environment of optimism, according to some employees. That’s what comes from reaching the mark of having more than 1,400 customers and 1,300-plus employees, spread over 45 countries.
Another reason the optimism seems justified is that OneStream is very much executing on the prospectus it laid out in its U.S. Securities and Exchange Commission filings for the IPO: Its strategy is well thought out, which is a point of differentiation amid the sea of tech companies that tend to display knee-jerk decision-making — which often works out, but sometimes doesn’t.
Michigan’s few huge software plays include Duo Security, a cybersecurity firm founded by Dug Song in Ann Arbor and purchased by Cisco in 2017 for $2.35 billion, plus some others that have made a global splash (see sidebar).
So, as unfamiliar as Wall Street was with Michigan-based software companies when OneStream went public in July, investors paid tribute to the stock even in spite of a remarkably stormy summer in the stock market. OneStream’s share price climbed steadily, if not spectacularly, between its debut at $20 in July and its $34-a-share range at the beginning of October.
Positive evaluations by securities analysts following the company helped the process along. OneStream “is one of the premier growth assets in all software and the new gold standard of Office of the CEO software, which is an increasingly critical and strategic area of investment in the enterprise,” BTIG analyst Matt VanVliet said in a client note early on.
TD Cowen analyst Derrick Wood, meanwhile, saw OneStream “riding the modernization wave” for CFO operations.
“Enterprise finance applications have lagged in the cloud transformation cycle and the market is still ridden with decades-old legacy technologies,” he wrote. “We think (OneStream) is positioned to disrupt the status quo, usher in new innovation around financial and operational workflows, and drive a strengthening legacy displacement and cloud-migration wave.”
On another point, Bank of America securities analysts believed OneStream can “steadily increase its share of its lucrative and lightly penetrated $44-billion market for business performance management software,” noting that OneStream had been growing faster than other back-office-software peers.
OneStream’s founding by three men who came out of the financial-software world is a major reason the company has continued to hit the mark even through its IPO phase. Their approach may not seem conservative by traditional growth patterns for new companies, but it certainly is in comparison with the go-go ethos of Silicon Valley.
What Shea, President Craig Colby, and Chief Technology Officer Bob Powers did in founding OneStream — their “big idea” — was create a single enterprise and finance software platform for the 16 disparate products the three had developed at their respective previous companies, UpStream and Hyperion. The co-founders were inspired by the iPhone, Shea says, because of its ability to integrate multiple tools into a single device.
The founding goal was to “empower the office of the chief financial officer.” At the time, that proved to be a very fitting and lucrative ambition, because CFOs were getting overwhelmed by disparate new programs to help them track and automate many different financial functions. Their computer “dashboards” to track all these programs came to resemble the instrument panel of an airliner cockpit.
Now, as OneStream climbs ever higher into a multibillion-dollar valuation, this goal is even more timely. That’s because the role of corporate CFOs the world over has shifted out of merely being the chief bean counter, making the trains run on time, and carrying out the mandates of the CEO — with an occasional hand-raise telling the boss something would just be too expensive, or too risky.
Now, CFOs increasingly are being tasked with stepping up as strategic thinkers for the future course of the business, as well as serving as the bridge between top leadership and financial realities. Because of that, there are more time and attention demands on CFOs than ever.
That change is “right on target for our value proposition,” Shea says. “OneStream is the first and only comprehensive platform for the Office of the CFO. Why is that? From the first line of code, we knew we needed to create a single integrated platform for core financial capabilities: planning, reporting, consolidation, (and) account reconciliation. Things every CFO has to do.
“Why is that important? It doesn’t matter (what company it is), or if you’re a fairly significant or complicated business, everyone has to do those things and do them right. Whether you’re just publishing them to internal stakeholders or Wall Street, or you’re just a company that has to create a different management view of the business, you have to do these things monthly, quarterly, semi-yearly, and yearly, and you have to do them well.”
OneStream takes pressure off CFOs and their teams in executing these routine duties. “Too often, they’re pushed to work long hours just to get those things done at the end of the month, quarter, and year,” Shea says. “So how can a CFO have an expanded role if they can barely get done what has to get done? The No. 1 one way you can help a CFO take on an expanded role is getting rid of the non-value-added work the finance teams are doing.”
New investor and regulatory requirements, along with increased expectations, have also added to a CFO’s burdens. And that’s in addition to the extra time and focus required of them to become a true strategic partner inside the C-suite.
“Every time one of these (requirements) adds to CFO duties, the team may have to take 10 or 15 different solutions, independent pieces of software, and change them and synchronize them all,” Shea explains.
“Without an integrated approach to do that, your time is spent just trying to stay current. The real way we’re changing this game and helping CFOs truly unlock the potential of finance is getting rid of non-value-added work.”
At the same time, Shea says, OneStream software “goes after new challenges and (expansion) of duties through our app store. We add new capabilities without creating tech debt” — known as the problems created in operation and maintenance when software writers take shortcuts in writing code so they achieve their goals faster — “because it’s running on our platform.
“If you do separate systems for reporting, planning, and account reconciliation, for instance, those pieces are linked at the legal-entity level. On average, we’re replacing two to six systems when we sell our software to a company. Imagine the amount of energy that goes into keeping those going.”
The co-founders were counting on initial customers being able to see clearly what OneStream software could do for them. That’s why they were confident they could secure a handful of early adopters.
“Next,” Shea recalls, “there was a major financial milestone, once we proved that this platform could build solutions on top of it. We said the next stop (was) $100 million in revenue. We had to do the hard work, just keep making our customers successful and proving it and proving it.”
The three bootstrapped the company for six years, growing in size, customer count, and workforce population to a few hundred each. Around 2018, when OneStream reached the milestone of $100 million in revenue that Shea looked forward to, they decided to bring in an outside investor.
KKR, the New York-based company that helped create the vaunted “leveraged buyout” of the 1980s and today ranks as a major private-equity player, has had a majority stake in OneStream since 2019, as well as a significant presence on the company’s board of directors. KKR brought on board members such as Gen. David Petraeus, former head of the Central Intelligence Agency.
“We didn’t need the money,” Shea says. “We were profitable and growing, with a positive operating cash flow, and had no debt. So why did we make that decision? It was actually significant in how it would take the business to the next level and push our goalposts out to $500 million” in revenue. “It helped us scale the business and figure out what the organizational structure had to be.”
OneStream enjoyed the attention of a handful of private-equity companies that would have loved to end up with the prize that KKR got. “We felt really aligned to KKR and (the fact) that they understood our vision and would be a partner, as well as bring capital-market capabilities,” Shea relays. “We had strong brand alignment, and they gave us access to other funding rounds we did.”
Shea’s founders gave up majority control of their baby because “some of our early investors were looking for liquidity,” he says. “They were looking for a return on investment. They’d spent years backing us. But (the founders) are still very significant shareholders. We still feel that we have ownership of the company. And KKR has treated us that way. It’s a good, balanced relationship.”
The next goal was hitting $500 million in revenue, or filing an IPO, whichever came first. OneStream privately filed for an IPO in 2021, for which it raised $200 million for a $6-billion valuation, before the market went cold. The company didn’t end up pursuing an IPO that year, which Shea says is a testament to its flexibility, and its plans to meet its goals responsibly.
With KKR’s guidance and expertise in the house, OneStream could have aimed for an IPO pre-COVID-19, and investment bankers — including Goldman Sachs — were interested in taking the company by the hand. But the founders believed they weren’t ready from the perspective of corporate maturity.
“As a software-as-a-service (SaaS) company,” Shea says, “we were transitioning from license revenue. We wanted to be all the way through our SaaS transition, which takes a lot of capital. And we didn’t want to have to explain that to public markets. That was all part of the calculus: There’s a really huge opportunity; focus on the long term; do it in the private markets.”
Another matter was growing too fast. When COVID-19 broke out in March 2020, it helped OneStream’s leadership hit the pause button. “There’s been a lot of self-inflicted head-count reductions lately” in tech companies, OneStream CFO Bill Koefoed told this interviewer in 2022. “As CFO, you need to have one foot on the accelerator and one on the brake at all times.
“For us, as founders of a bootstrapped company, although we’ve been going through a lot (of growth), we’ve been pretty judicious about hiring and making sure we’re not over-hiring. It hasn’t been growth at all costs. It’s appropriate to say we’ve got one foot on the brake in hiring.”
In 2022, for example, OneStream hired about 300 people, which marked 30-percent growth over its head count a year earlier. “But if you look at our plan going into that year, our expectation was we were going to hire more than that,” Koefoed said.
As OneStream grew, it wasn’t all about ciphers and cyber, bits and bytes, dollars and cents. The company also tried to create some of the sizzle that befits any kind of digital-tech company.
For example, its marketing expenditures included sponsorship of some relatively high-profile athletes, including professional golfers Bryson DeChambeau, Marc Leishman, Sophia Popov, and Hudson Swafford, along with Scottish tennis champion Jamie Murray.
Successful software companies also typically major in culture, in creating the kind of atmosphere and ethos that younger workers demand and, at least for a time, pledge their loyalty to.
“I like to say we have a mission-driven culture,” Shea says. “From the beginning, we knew the company could only be built with a sensitivity for what we do — using OneStream output to report to external stakeholders. You have to be successful, for them, and that’s the mission that drives you.
“Every customer needs to be a reference. The only way that works is when it’s demonstrated (to be important) by leaders. So I have very much of an, ‘I’m in it with you’ mentality as a leader. This mission gives people something to be proud and thoughtful about, and helps create a mission-driven culture.”
So does the company’s headquarters in downtown Birmingham. OneStream’s early growth occurred in two rented office buildings in Rochester, one beneath the bridge on Rochester Road that leads to downtown.
A few years ago, OneStream was putting together a deal to erect its own campus nearby, but things didn’t work out. Soon after, Birmingham beckoned with some intriguing real estate opportunities as well as one endemic characteristic that Rochester couldn’t beat: being about 20 minutes closer to Detroit Metro Airport.
Moving ahead, OneStream acquired a former church just north of Maple Road, at 191 N. Chester Street, and spent $2 million to $3 million remodeling it into a 23,000-square-foot headquarters facility that holds about 150 employees on peak days of hybrid attendance.
It boasts 100-percent LED lighting, polished concrete flooring, and numerous other “sustainable design elements” such as a heating and cooling system designed to consume up to 22 percent less energy than traditional systems, according to the company.
“We designed the space with the goal of creating an energy-efficient and design-forward facility that could be a standout in any technology hub from San Francisco to Seattle or New York,” says Koefoed, who had spent 15 years with various tech companies in Seattle and Silicon Valley.
As Shea puts it, the building is “a great place for people to work, where they feel welcome and valued. It’s been a nice gathering place for us, warm and bright with a lot of energy. When you show up there, you can feel the energy.”
That’s the key: when employees show up. OneStream maintains the hybrid policies it put in place during the pandemic, giving employees a lot of physical flexibility. “The highest number of our employees are our sales and marketing people” around the world, “and they’ve been naturally remote. We’ve kept that basically in place,” Shea says.
“What wasn’t (remote) was engineering. When we’re designing products and coding, that’s where it’s been a bit different. Certain teams have rules or (attendance) guidelines. If they’re doing complex engineering, or working with AI, they need to be in the room together. That’s the best way to convey thoughts. I see teams adapting to what makes them efficient, but (attendance) works best for us as a company. I like to be around people myself. Right now, people are spending more time coming into the office.”
In the meantime, bespeaking the fact OneStream’s leadership all come from the cautious finance world, even all of these positive elements didn’t quite add up to readiness for an IPO.
There also were quarterly losses OneStream sustained for a while as it made the transition to an all-SaaS company. “With a full SaaS model, you’re charging on a monthly or a yearly basis, and there’s different revenue recognition and accounting,” Shea says. “This will create cash flow and profitability challenges until we’re all the way through” the transition.
OneStream also continues to invest in the business. “Not long ago, we only had 300 to 400 people,” Shea says. “Now we’re scaling up the organization to be a billion-dollar company. We’ve had to make a lot of investments in the infrastructure of the business, and now you start to get leverage on those investments.”
Growth at OneStream may not be as exponential as at other unicorns, but that’s on purpose. “Just when you think you’ve figured out how to be a certain size of company — and I’ve been an entrepreneur for a number of years — and you hit a level where you’ve figured this out, your organizational structure is right, you’ve got the right approach to go to market — suddenly, a year later, you’re broken again,” Shea says.
OneStream also faced the challenges of growing in the international arena.
Its big idea was universal, of course, and numbers are a language of their own not subject to translation difficulties. “But you operate one way in the U.S., and you have to be very aware and think when you operate in Europe,” Shea says.
For instance, when it comes to hiring talent there, German consultants pretty much only work with German companies; it’s the same with French consultants and French companies.
As Detroiters, Shea says, his founding team brought “that Detroit mentality” to growing OneStream: “Just go out there and get it done. But as you get bigger and bigger, you need to refine. You don’t want to lose the grit, but you have to start to add the polish, too.
“You have to be aware of the profile of the company and the discipline that needs to go into being a larger organization, or even pre-public. You have to make sure you’re ready.”
As part of its preparations for the IPO over the last year or so, for example, KKR helped the executives participate in mock calls with securities analysts and investors.
“You have to think clearly about the story you’re telling and how you tell it,” Shea says. “What is the value proposition? How did you get where you are, and how will you continue to do it?
“What you really learn from that exercise is that (investors) don’t necessarily understand your business at your customer’s depth. They’re looking at 100 companies” as potential investment targets, “so you have to be clear in articulating your value proposition and make sure you’re repeating and learning from those individuals.
“You need to get the right understanding of what you’re trying to achieve. You sell a sophisticated product to a sophisticated buyer, so you want (an investor) or analyst to understand all the different aspects. You really have to practice that.”
Judging by OneStream’s share price and analysts’ appreciation for the company’s proposition, it’s so far, so good.
But can a company that’s taken more than a decade to grow this formidable, with a big idea as good as OneStream’s, keep going without significant competition, without keeping a door open for another company that could offer a single platform akin to OneStream’s?
“Yes,” Shea posits. “There’s no other legitimate single platform for the CFO because our mentality began with our first line of code. You can’t (acquire) your way into it.
“The ‘one’ in ‘OneStream’ was part of a rollup” of previous single-function software platforms, “and you can’t get there without starting over. To the extent (competitors) are offering multiple solutions, they’re still usually strung together from different pieces of technology, because they haven’t started something from the beginning.”
Just as in many other technology firms — and practically every business, for that matter — the rapid evolution of artificial intelligence poses both a threat and an opportunity to OneStream. But mostly, in Shea’s view, it’s an opportunity.
“AI is a foundational part of our story, and one of the things I’m most excited about,” he says. “Unlike a lot of businesses out there today, we began our AI journey almost a decade ago. In 2015, we saw real hype around machine learning — similar to where we are right now” with generative AI.
“We demonstrated the first machine learning neural-network forecasting capability in early 2017 at our user conference,” Shea says. “After that, we recognized that people really liked it; they don’t understand it, but they’d better invest in it. So from early 2017 and since, we rededicated ourselves to an AI-service component and a section of our platform with our own intellectual property.
“Now,” Shea continues, “major companies are using AI for demand forecasting, such as major retailers around the world, and testing language-learning platforms as they play with (ChatGPT).
“Early machine learning models can outperform what humans can do in predicting, but if you don’t show a financial analyst why this was a better prediction of demand, such as the performance of a sales promotion or how weather affects shipments, they wouldn’t get it. So our AI has to be transparent, auditable, and repeatable.”
Bank of America analyst Koji Ikeda noted OneStream’s advanced AI tools — which, he said in a research note last summer, “aim to accelerate the creation of new applications. As more OneStream-powered apps are created, the platform would likely become even more entrenched, making it even more difficult to replace.”
While the company allowed an interview with Shea for this story, it declined to provide access to any OneStream directors, other members of its management team, or other employees.
All of which enhances the one thing Shea wants out of OneStream more than anything else: irreplaceability. And the only way to continue to ensure that, he believes, is to follow the approach he and his team have used from the beginning.
“I grew up in the auto business, and companies that had 8 percent, that was a great operating margin,” he says. “So I learned in a disciplined era. That’s our natural way of working here; a lot of the financial team thinks the same way. We’re very confident of our ability to run a profitable business and evolve it.”
OneStream Inc.
Service: Creates custom enterprise software financial
platforms targeted to CFOs
Headquarters: Birmingham
Revenue: $450M
Employees: 1,300+
Customers: 1,400+
CEO: Tom Shea
Founded: 2012
