First Outside Investment In 30 Years Makes Life Sciences Software Firm A Unicorn

Most software startups seek venture funding in the early stages. MasterControl, which provides quality and manufacturing software for life sciences companies, waited nearly 30 years. Now with its first outside investment, for $150 million from Sixth Street Growth, the under-the-radar company is worth $1.3 billion, CEO Jon Beckstrand tells Forbes.

“We’ve tried to grow as fast as we can, cash-flow breakeven, for the past 30 years,” Beckstrand says. “It’s been interesting to tell the story to potential financing partners over the past year.”

Founded in 1993 as a document-control company, Salt Lake City-based MasterControl bootstrapped for years, eventually attracting more than 1,100 customers worldwide, including giants like Pfizer
PFE
and Thermo Fisher Scientific
TMO
. Its annual recurring revenue, or ARR—a metric preferred by software companies that operate on a subscription basis—is more than $100 million. Its yearly revenue for accounting purposes is expected to be between $120 million and $140 million for 2022.

MasterControl’s software aims to make processes smoother for pharmaceutical and medical-device companies. Its original product was designed to help clients navigate the arduous Food and Drug Administration’s regulatory-approval procedures while newer software works to root out inefficiencies that lead to quality problems and product delays. The fresh funding comes as drug- and device-makers face ongoing manufacturing hiccups and supply-chain snafus. “We look at it as our job to help get products to market sooner at higher quality and lower cost,” Beckstrand says.

Beckstrand, 54, who is both a lawyer and an accountant, first joined the company as a board member after his father, Richard Beckstrand, a long-time entrepreneur and private investor, invested in 1998 in what was then a small business. In 2002, after the elder Beckstrand bought out other shareholders, Jon Beckstrand became CEO. “I was going to come in to be the CEO until we found someone else, and it ended up being not temporary,” he says.

The Salt Lake City-based life sciences software company has flown under-the-radar for decades. Now it’s worth $1.3 billion.

After the FDA started allowing life-sciences firms to use electronic records, MasterControl shifted its focus to that industry.

One client, Fagron, whose business is compounding pharmacies and personalized medications, rolled out MasterControl’s quality software in 2017. Before that, the $950 million (market cap) publicly traded firm used “spreadsheets, paper, different log books, home-built systems,” says Matthew Seitz-Paquette, a North America quality control specialist. He figures Fagron saves an average five minutes per task by automating its quality processes, resulting in $300,000 annual labor savings. The company is now testing MasterControl’s manufacturing software, which it plans to roll out in a first location in January. The expectation there, Seitz-Paquette says, is $10 million in cost savings over the next five years. “We’ll have fewer errors in the records,” he says, “and sometimes errors are big enough that you have to throw the whole batch out.”

The pandemic highlighted the problems that life-sciences and medical device firms faced with their continued reliance on paper, says Sixth Street managing director Nari Ansari. Between supply-chain bottlenecks and quality problems, he says, “it’s really shown a light on where there are deficiencies.” He figures that the total addressable market globally for MasterControl’s existing software products tops $10 billion.

Armed with the new cash, the company plans to build out its software with artificial intelligence and machine learning in order to be able to predict and prevent quality problems. With a potential recession looming, Beckstrand says that he sees signs of caution with more orders getting held up on CFOs’ desks than previously. But he figures that MasterControl’s focus on life sciences, which is less subject to economic ups and downs, will help buffer it from a slowing economy. Plus, he says, “recessions are a great time to invest in R&D.”

San Francisco-based Sixth Street Partners, which was once affiliated with TPG, manages more than $60 billion in assets. It recently raised $4.4 billion for investments in growing software companies to take advantage of the ongoing market disruption. Ansari says that the tech growth team has deployed more than $1 billion in 10 portfolio investments since the beginning of the year.

“There are more companies like this than you think that are building things the hard way,” he says. “You may not find them in Silicon Valley. You have to go to Salt Lake and Atlanta and Chicago.”