Maybe it’s not such a good idea to “be a tech company.”
Source: Mattress flop
Maybe it’s not such a good idea to “be a tech company.”
Source: Mattress flop
Shuttleworth in a separate interview at the OIS event also said that Canonical remains on track for a long-gestating IPO. Those plans were initially hinted at in mid-2017.
Like most other ‘new generation’ IT providers, Fastly plays up its growth rate while playing down the cost of that growth. Sales at the company rose about 40%, year over year, in 2018 to $145m. In comparison, Akamai is a single-digit percentage grower, although it is roughly 10 times larger than Fastly. Fastly also runs in the red, largely because its gross margins are just 54%, 10 percentage points lower than those at Akamai.
Source: A new player in a new game
The sharing economy, fueled by the internet’s capacity to match small buyers and sellers, looks like a revolutionary business model. But for this model to be sustained, there must be a reliable source of long-term profits. Ride-hailing is perhaps the application of the sharing economy that is currently most developed, so its success or failure will teach us a great deal about the model’s viability in the global business landscape.
At some point, you have to make a profit.
It also ads a cynical angle to “disruption” that’s often omitted: you have to burn a lot of money, maybe even 5 or 10 year’s worth. Older companies often can’t do this without a huge financial and share-holder toll.
the trend has accelerated in just the past half-decade as gigantic pools of private capital have, to some degree, replaced public market investors.
Original source: Waving goodbye to Wall Street
“Founded in 2007, Dropbox epitomizes the freemium go-to-market. Dropbox has grown from 0 to 500 million users over that time period. 2% of those users convert to paid and pay an average of $9.33 per month. 90% of revenue originates through self serve channels – an astounding figure for company that generated more than $1B in revenue last year.”
Original source: Dropbox S-1 Analysis – The King of Freemium
“Dropbox made $1.106 billion in revenue in the year ending in December, and lost $111.7 million on a net basis. That was growth of 31% in revenue terms, and an improvement on the bottom line of roughly half the year-earlier losses.”
Original source: Dropbox IPO and financials
“Given the data we shared at the beginning of this post – 75% of the top 20 performing IPOs from the last four years went out at valuations below $1 billion – one would think we’d see this trend picking up steam. Recent sub-$1 billion IPOs by companies like SendGrid, Blackline and TradeDesk have all done very well. Our bet, however, is small cap IPOs will continue to be few and far between until a) the late stage private capital market gets more difficult, b) investment banks decide to focus on smaller deals, or c) the regulatory requirements of public companies are reduced. None of these is likely to happen soon.”
The gate keepers want the biggest pound of flesh possible. It’s how percentages work.
Original source: The Majority of Top Performing IPOs Were Never Unicorns | Jeff Richards | Pulse | LinkedIn
“doing over $1B in annualized sales and are cash flow positive.”
Original source: Dropbox files for IPO — and their numbers are looking solid
Appian raised just $48m as a private company, compared with $163m for Alteryx, $220m for Okta, $259m for MuleSoft and more than $1bn for Cloudera. In fact, all four of the unicorn IPOs raised more in a single round of private-market funding than Appian did in total VC funding.Not having done an IPO-sized funding in the private market meant that Appian could come public with a more modest raise. (It took in just $75m, compared with this year’s previous IPOs that raised, on average, $190m for the four unicorns.) And, probably most importantly, the Appian offering showed that these types of IPOs can work, both for issuers and investors. (Appian created about $900m of market value, and saw its shares finish the first day of trading up about 25%.) So when it comes to IPOs for the second half of this year, the ‘Appian way’ could help a lot more startups make it to Wall Street. “Will the ‘Appian way’ lead more startups to Wall Street?”
Put another way: maybe you don’t have to be unicorn class to IPO now? Who knows really, it’s always a bit of a mystery.
Appian provides app development software for its business and government customers. “With our platform, organizations can rapidly and easily design, build and implement powerful, enterprise-grade custom applications through our intuitive, visual interface with little or no coding required,” the company explained in their S-1 filing…. Appian acknowledges that its biggest competitors are Salesforce and ServiceNow. IBM and Oracle are also in related spaces.
Founded in 1999, Appian offers a software as a service platform that helps business people create enterprise applications, especially for managing business processes, without needing programming expertise. The company is known for its “low-code” approach that allows non-programmers to create applications using building blocks and data, but managed and deployed by developers in a company’s information technology department, all on the same technology platform.
Meanwhile, Gartner’s magic quadrant on this space (“Enterprise High- Productivity Application Platform as a Service”), says of Appian:
Appian is an hpaPaaS vendor with strong business process management (BPM) and case management capabilities. Appian has been delivering its Appian Cloud platform since 2007. It has taken a uni ed-platform approach that enables a single application de nition to be accessed on a range of devices without additional development. Appian applications can be developed and executed both on-premises and on its aPaaS offering. Appian has positioned its Appian Cloud platform for general-purpose application development, which includes robust process orchestration, application life cycle management and integration capabilities that compete with both hpaPaaS and high-performance RAD vendors, with a common per-user or per-application-and-user pricing model.
And a few more interesting items from Gartner:
There’s a few stories out about Canonical, likely centered around some PR campaign that they’re seeking to IPO at some time, shifting the company around appropriately. Here’s some highlights from the recent spate of news around Canonical.
Why care? Aside from Canonical just being interesting – they’ve been first and/or early to many cloud technologies and containers – there’d finally be another Red Hat if they were public.
Most of the open source thought-lords agree that “there can never be another Red Hat,” so, we’ll see if the Ubuntu folks can pull it off. Or, at the very least, how an pure open source company wangles it out otherwise.
That said, SUSE (part of HPE/Micro Focus) has built an interesting business around Linux, OpenStack, and related stuff. Ever since disentangling from Novell, SUSE has had impressive growth (usually something around 20 and 25% a year in revenue). All is which to, the Red Hat model actually is being used successfully by SUSE, which, arguably, just suffered from negative synergies (or, for those who don’t like big words, “shit the bed”) when it was owned by Novell.
As I’m perhaps too fond of contextualizing, it’s also good to remember that Red Hat is still “just” a $2.5bn company, by revenue. Revenue was $1.5bn in 2014, so, still, very impressive growth; but, that’s been a long, 24 year journey.
All these “Linux vendors,”like pretty much everyone else in the infrastructure software market, are battling for control over the new platform, that stack of cloud-y software that is defining “cloud-native,” using containers, and trying to enable the process/mindset/culture of DevOps. This is all in response to responding to enterprises’ growing desire to be more strategic with IT.
Shuttleworth said “in the last year, Ubuntu cloud growth had been 70 percent on the private cloud and 90 percent on the public cloud.” In particular, “Ubuntu has been gaining more customers on the big five public clouds.”
Its OpenStack cloud division has been profitable, said Shuttleworth, since 2015
Al Sadowski has an extensive report on Canonical, mentioning:
[Canonical] now has more than 700 paying customers and sees a $1bn business for its OS, applications and IT operations software. Time will tell if this goal is realized.
Canonical claims some 700 customers paying for its support services on top of Ubuntu and other offerings (double the 350 it had three years ago), and to have achieved more than $100m in bookings in its last financial year…. [Overall, it’s] not yet a profitable business (although its Ubuntu unit is). We estimate GAAP revenue of about $95m.
On focusing the portfolio, shoring it up for better finances for an IPO:
we had to cut out those parts that couldn’t meet an investors’ needs. The immediate work is get all parts of the company profitable.
To that end, as Alexander J. Martin reports:
More than 80 workers at Ubuntu-maker Canonical are facing the chop as founder Mark Shuttleworth takes back the role of chief executive officer…. 31 or more staffers have already left the Linux distro biz ahead of Shuttleworth’s rise, with at least 26 others now on formal notice and uncertainty surrounding the remainder
Back to Al on the Job to Be done, building and supporting those new cloud-native platforms:
Rather than offering ways to support legacy applications, the company has placed bets on its Ubuntu operating system for cloud-native applications, OpenStack IaaS for infrastructure management, and Docker and Kubernetes container software.
And, it seems to be working:
Supporting public cloud providers has been a success story for Canonical – year-over-year revenue grew 91% in this area…. Per Canonical, 70% of the guest OS images on AWS and 80% of the Linux images on Microsoft Azure are Ubuntu. Its bare-metal offering, MaaS (Metal as a Service), is now used on 80,000 physical servers.
On OpenStack in particular:
Canonical claims to be building 4,000 OpenStack deployments a month at some 180 vendors…. It claims multiple seven-figure deals (through partners) for its BootStrap managed OpenStack-as-a-service offering, and that the average deal size for OpenStack is trending upward.
The Vaughan-Nichols piece outlines Shuttleworth’s IPO plans:
Still, there is “no timeline for the IPO.” First, Shuttleworth wants all parts of the slimmed down Canonical to be profitable. Then “we will take a round of investment.” After that, Canonical will go public.
However, Al’s report says:
It is not seeking additional funding at this time.
Probably both are true, and the answer as Shuttleworth says is “well, in a few years once we get the company to be profitable.
There’s lots of opinions on Cloudera’s IPO today. Here’s some that I’ve collected in my notebook.
The chipmaker paid up for the privilege, putting a ‘quadra unicorn’ valuation of $4.1bn on Cloudera. Altogether, Cloudera raised more than $1bn from private market investors, making the $225m raised from public market investors seem almost like lunch money.
And then there’s the small matter of valuation. In its debut, Cloudera is only worth about half of what Intel thought it was worth when it made its bet.
“Much has been made of the huge valuation of that Intel-led round, but that’s all misguided noise,” according to IPO Candy, a website founded by Kris Tuttle, the director of research at Soundview Technology Group. “Intel didn’t make the investment for a financial return so the valuation isn’t relevant.”
Back in 2014, Intel was still smarting from missing the shift to mobile computing and Big Data was a favorite as the next big thing. The Santa Clara chip giant’s bet was placed chasing a strategic return, not so much banking a direct return on investment.
You know, all of this is a little bit of ¯_(ツ)_/¯. As I recall, Facebook’s IPO was all wiggly-woggly. If Cloudera makes a lot of money, gets bought for a lot of money, etc., no one will care to remember, just like with Facebook. Success is the best deodorant.
Also from 451, earlier this month, a profile of their business:
Cloudera is nearly one-third bigger than Hortonworks, recording $261m in sales in its most recent fiscal year compared with $184m for Hortonworks. Both are growing at roughly 50%.
Since 2008, the company has grown steadily. As of January 31, it reports more than 1,000 customers. However, Cloudera is currently emphasizing and banking its success on what it calls the Global 8,000, which are the largest enterprises worldwide. The company notes that its number of Global 8,000 customers increased from 255 as of January 31, 2015, to 381 as of January 31, 2016, and 495 as of January 31. For the year ended January 31, the Global 8,000 represented 73% of Cloudera’s total revenue, while a further 10% of total sales came from the public sector. The company reports 1,470 fulltime employees as of January 31, a slight increase from its headcount of 1,140 the prior year.
More from Katie Roof at TechCrunch:
Cloudera’s market cap is now about $2.3 billion, significantly less than the $4.1 billion valuation Intel gave in 2014. This increasingly common phenomenon is now nicknamed a “down round IPO.”
In an interview with TechCrunch, CEO Tom Riley insisted that this was not a problem for the company because of the “growth prospects ahead of us.” If it performs well in the stock market, it could ultimately achieve the $4 billion-plus value. Square, which went public in 2015 at half its private market valuation, has since seen its share prices more than double.
(Side-note: comparisons of companies, Square and Cloudera, that have nothing to do with each other except being “tech” – and Square is payment processing, not “pure tech,” at that! – drive me a bit crazy, as listeners know.)
And a quick revenue/spend write-up from her:
Cloudera’s revenue is growing, totaling $261 million for the fiscal year that ended in January. The company brought in $166 million at the same time last year.
Losses were $186.32 million, down from $203 million in the same period the year before.
And, according to Jonathan Vanian: “Cloudera spent $203 million on sales and marketing in its latest fiscal year, up 26% from the previous year.”
I don’t really follow this space well enough anymore to quickly figure out the TAM: I suspect Cloudera operates in several data and BI related ones.
Cloudera isn’t only Hadoop, but 451 put the Hadoop market at $1.3b in 2016, growing to $4.4b in 2020, with a CAGR of 38.3% between 2015 & 2020.
If you throw data warehousing, BI, analytics, and an injection of the mega-databases TAM together, you get a really big TAM, anyhow. Keep in mind though that one of the traps of (definitionally orthodox) disruptors in this space is lowering the TAM of their respective markets, a la Red Hat in operating systems. I don’t get the sense that Cloudera is on that game plan, but others in the market might be.
With respect to what people would do with Cloudera and others in this space (including Pivotal), here’s a good ranking of the information infrastructure priorities Gartner recently found in enterprises:
Also of public/private cloud interest from the summary of that survey: “Based on survey responses, plans for on-premises deployments for production uses of data will drop from today’s 45% to 14% in 2018.”
People in the tech industry care a great deal about IPO’s like this. We’re all curious what The Market’s read on valuation of enterprise IT business models is for our own benefit, and just a general sense of the health of the sector. There’s also usually people you know at the company, so “yay” for people you know.
One day isn’t long enough to tell anything, though, cf., in a completely different space, that Facebook debut weirdness. People got all excited about Cisco buying AppDynamics because that seemed to show some “healthy” signs that money valued this kind of software/SaaS.
At any rate, people still seem to love the Big Data and such. From Cloudera’s CEO, Tom Reilly: “We’re competing with IBM and Watson, so our customers seeing the strength of our finances allows us to do more.” Think of all the free marketing!
The ensuing years have been remarkable. Our company has grown with the market. The original technology has morphed almost beyond recognition, adding real-time, SQL, streaming, machine learning capabilities and more. That’s driven adoption among some of the very biggest enterprises on the planet. They’re running a huge variety of applications, solving a wide variety of critical business problems.
Our early bet has proven correct: Data is changing the world. In applications like fraud detection and prevention, securing networks against cyberattacks and optimizing fleet performance in logistics and trucking, we’re delivering value. We’re helping to address big social challenges, improving patient outcomes in healthcare and helping law enforcement find and shut down human trafficking networks.
Against that background, an IPO takes on a more appropriate scale. We started Cloudera because we believe that data makes things that are impossible today, possible tomorrow. There’s more data coming, and there are plenty of impossible things to work on. Our journey is only well begun.
I admittedly don’t know Cloudera’s business model too well, but my sense is that they align well with the “have something to sell” model that many open source companies in the enterprise space forget to put in place.
The San Francisco-headquartered business revealed it pulled in $187.7m last year, up 170 per cent from its $110.3m in revenue in 2015. Gross profits were just over $138m from $78m, and net losses decreased to a piddling $49.6m, down from $65.4m the year before.
Another take from Barb Darrow, inc.:
Mulesoft has raised $1.5 billion in venture funding from such backers as Lightspeed Venture Partners, Hummer Winblad, and New Enterprise Associates.
Man, that’s a lot of money poured into it since 2006 – “G round.”
From Snap’s S-1, via Ben:
In a world where anyone can distribute products instantly and provide them for free, the best way to compete is by innovating to create the most engaging products. That’s because it’s difficult to use distribution or cost as a competitive advantage—new software is available to users immediately, and for free. We believe this means that our industry favors companies that innovate, because people will use their products.
Around 33 per cent of the technology companies to enter the market in the last ten years are currently valued at a price lower than their IPO mark.
This according to researchers with analytics house Geckoboard, who studied 100 software, hardware, and social networking companies that have undertaken IPOs since 2006. Of those 100 companies, 67 are trading above their IPO valuation and 33 are below.
Investors are betting 2017 will be better. Renaissance Capital pointed out that the average total return of I.P.O.s in 2016 reached 23 percent, a sharp reversal from the negative 2.1 percent return of 2015 offerings and surpassing the 21 percent return of two years ago.
The number of enterprise-focused companies that have set sail to Wall Street this year is once again mired in the single digits. That’s a disappointment given the abundant IPO-ready tech vendors and a bullish investor base that has pushed the broader US equity market to record levels in 2016.
By our count, just eight enterprise tech firms have made it public on the two major US exchanges so far this year, matching the total from 2015.
|Company||Date of offering|
|SecureWorks||April 22, 2016|
|Twilio||June 23, 2016|
|Talend||July 29, 2016|
|Apptio||September 23, 2016|
|Nutanix||September 30, 2016|
|Everbridge||October 10, 2016|
|BlackLine Systems||October 28, 2016|
|Quantenna Communications||October 28, 2016|
But, the reason isn’t a lack of exits, there’s been much M&A in tech this past year, as Scott says:
Total M&A spending on infrastructure management jumped 57% to $15.2bn, with the volume of transactions rising to 152 from 146 as we near the end of 2016.
There are some big chunks in there – like the weirdly structured HP/MicroFocus deal for HP’s Software and cloud software groups which was $8.8bn, but left HP owning 51% of the combined company…so whatever you call that kind of deal.
It’s be even more helpful to see what the profits/returns on these deal were. Brenon has this on those eight tech IPOs:
The valuation of these acquisitions underscores the fact that December dealmaking has featured more ‘value’ than ‘growth’ strategies. All five of this month’s biggest deals have gone off at less than 4.4 times trailing sales, which is the average multiple for the 50 largest transactions announced overall in 2016, according to the M&A KnowledgeBase. On average, buyers in December have paid 3.3x trailing sales, a full turn lower than they did in the previous months of the year.