Welcome back to The ProWellTech Exchange, a weekly newsletter of startups and markets. It is largely based on the daily column that appears in Extra Crunch , but free and meant for weekend reading.
Ready? Let's talk about money, startups and hot IPO rumors.Was Snowflake's IPO badly rated or just misunderstood?
With an ocean of great things to read below, we'll be quick today on our Snowflake IPO-focused thought bubble. At first it was a huge success as a data-centric unicorn fundraising event.
At issue is the mismatch between the company's final IPO price of $ 120 and the location where it opened, which was around $ 245 per share. The usual forces were out on Twitter claiming billions were left on the table, with comments on the issue of a mispriced IPO reaching even our friends on CNBC.
A good question given the controversy is how the company itself felt about the price of its IPO as it was the party that, in theory, left a few billion on a metaphorical table. As it turns out, the CEO doesn't care.
Alex Konrad of Forbes - a nice guy, follow him on Twitter Here - met Frank Slootman, CEO of Snowflake, about the matter. He called "nonsense" the "chatter" that his company left on the table, adding that it could have been priced higher but that "he wanted to take with him the group of investors who [Snowflake] wanted, and [he] I didn't want to push them past the point where they really started screaming. "
So Slootman found a new, higher price to value his company at during its debut. He got the investors he wanted. He involved Berkshire and Salesforce in the deal. And the company roared out the gate. What a terrible, terrible, useless, mess of an IPO.
Adding to the mix, I was chatting with some SaaS VCs earlier this week, and they largely did not accept the argument of the money left on the table, as assuming an entire block of shares could be sold at the opening price of the trade is silly. Are IPOs perfect? Hell, no. Are the bankers out for their own good? Yes. But that doesn't mean Snowflake was wrong.
Market Notes
There is no time to waste, let's get into it:
- Lots of IPOs this week and everyone has done well. Snowflake was explosive while JFrog was just awesome. Sumo Logic and Unity had more modest debuts, but still good results. Notes from JFrog and Sumo executives in a snap.
- Disrupt was a big deal this week, with famed technology and its emerging leaders showing up to chat with ProWellTech about what's happening today and what's going to happen tomorrow. You can catch up on the sessions here, which I recommend. But I wanted to take a moment and thank ProWellTech's sales, partnership and events teams. They killed him and got 0.1% of the love they deserve. Thank you.
- Why is Snowflake special? This tweet from Jeff Richards of GGV has the story in a graph.
- What are the hottest categories for SaaS startups in 2020? We got you.
- There's a new VC metric in town that startups need to follow. People will remember the infamous T2D3 model, where startups are supposed to triple twice and then double three times. That five-year plan brought most companies $ 100 million in ARR. Shasta Ventures' Now Issac Roth he has a new model for contention, what he calls the "C170R" and, according to a piece from his company, believes it could be the "new post-COVID SaaS standard." (We talked to Roth about API-focused startups the other day.)
- So what is it? According to his own notes: "If a startup entering COVID season with $ 2-20M in revenue is on track for 170% of 2019 revenue AND is in line with the new remote normal, it will be able to raise. new capital on good terms and are set for the future success of the venture. "It should be noted that this year there is less need to double or triple.
- Our thought bubble: If this catches on, many more SaaS startups would be eligible for new rounds than we thought. And since Shasta is all-in on SaaS, perhaps this metric is some kind of welcome mat. Wonder which portion of VC agrees with Shasta's new model?
- And, in closing, our immersion in code-free and low-code startups continues.
Various and various
Again, there is so much to do that there is no room to waste words. Come on:
- Chime has raised an ocean of capital, which is remarkable for a few reasons. First, a new valuation of $ 14.5 billion, which has risen a zillion percent since their first round of 2019 and about 3x since its last round of 2019. And it claims true EBITDA profitability. And with the company saying it will be ready for IPO in 12 months, I'm excited about the company. Because not all companies that run a large fintech valuation are in great shape.
- I spoke on the phone with JFrog's CEO and CFO following their IPO this week to discuss the offer. The pair looked at every IPO that took place during COVID, they said, to try and get their company at a "fair price," adding that from now on the market will decide what the right number is. CEO Shlomi Ben Haim also made a funny allusion to a tweet comparing JFrog's opening rating to the price Microsoft paid for GitHub. I think this is the tweet.
- JFrog's price was derived from the fact that it was earning money, which is real GAAP net income in the most recent quarter. According to JFrog CFO Jacob Shulman "investors were impressed by the numbers" and were also impressed by his "efficient market model" which allowed him to find "viral adoption within the company".
- This last sentence sounds like an efficient sales and marketing spend.
- Switch to Sumo Logic, also released this week (notes S-1 here). I contacted the CTO of the company Christian Beedgen.
- With Beedgen, I just want to say, it's a pleasure to chat. But more on the subject, the company's IPO went well and I wanted to delve more into the core of the market that Sumo is seeing. After Beedgen explained to me how he views his company's TAM ($ 50 billion) and market dynamics (not winner takes all), I inquired about the sales friction among corporate clients that Slack had mentioned in his report. on most recent earnings. Beedgen said:
- "Personally, I don't see it as a systemic problem. [...] I think people in economies are very flexible and you know the new normal is what it is now. And you know these other guys on the other side [of the phone], these companies also need to keep managing their stuff and therefore will continue to understand how we can help. And they will find us, we will find them. I don't really see it as a systemic problem. "
- So, good news for business startups everywhere!
- Wix has launched a non-VC fund that looks a bit like a VC fund. Called Wix Capital, the group "will invest in technology innovators who focus on the future of the web and who seek to accelerate how businesses operate in today's evolving digital landscape," according to the company.
- Wix is a large public store these days, with low-key, no-code elements in the center. (The Exchange spoke to the company not long ago.)
- And, finally my friends, I call it the Peloton effectand I'll write about it if I can find the time.
I'm chatting with a Unity executive tonight, but it's too late to enter this newsletter. Maybe next week. Hug until then and stay safe.