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Olo prices IPO sharply above its target, valuing company as high as $4.6B
A big story in the finance world this morning is that the Nasdaq composite index lost ground in pre-market trading while bond yields rose. The concern is that inflation could rise, which led to bonds selling off and falling valuations for expensive stocks. So, tech stocks were broadly lower this morning.
Unlike last night, when New York-based restaurant software company Olo priced its IPO at $25 per share, sharply above its raised IPO target price range.
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Today, we’re checking in on the price investors paid for a block of Olo shares before it began trading. The resulting valuation and its new revenue multiples will help us answer several questions.
First, how hot is the market for high-growth tech shares that also feature profitability? And, second, is Olo pricing ahead of, or behind, known comps? If the latter is true, it could point to a cooling enthusiasm among public investors for tech IPOs, even if the headline numbers coming from the Olo IPO are impressive.
Then we’re going to chat about Coinbase’s latest S-1/A filing, which helps provide a bit of guidance regarding how its direct listing is scooting along.
Ready to get caught up on the public-private divide that the most successful startups cross? Let’s get into it!
Is Olo’s IPO pricing aggressive, neutral or a letdown?
As a quick reminder, Olo initially targeted a $16 to $18 per-share IPO price interval. That was raised, as expected, to $20 to $22 per share. Pricing at $25, then, is a strong 56.25% greater per-share value than the low end of the company’s first estimate.
As Olo featured rapid growth (an acceleration in year-over-year revenue from 59.4% in 2019 to 94.2% in 2020), and GAAP profits (a 2019-era net loss of $8.3 million became 2020 net income of $3.1 million) in its IPO filings, the first price range it rolled out felt a bit light. The second, however, felt more appropriate.
At $25 per share, we have to do new math. Using a simple share count inclusive of the company’s underwriters’ option, Olo is worth $3.62 billion. That figure swells to $4.6 billion when a fully diluted valuation is calculated, per IPO watch group Renaissance Capital.
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Olo raises IPO range as DigitalOcean sees possible $5B debut valuation
It’s a busy day in IPO-land: Olo has raised its IPO range and DigitalOcean is giving us a first look at what it may be worth when it debuts.
That Olo raised its IPO price is not a huge surprise, given the software company’s rapid growth and profits. In the case of DigitalOcean, we have more work to do as its approach to growth is a bit different.
Let’s explore both companies’ pricing intervals through our usual lens of revenue multiples, market comps and general SaaS sass. We’ll do this in alphabetical order, which puts the cloud infra company up first.
DigitalOcean’s IPO price range
According to its S-1/A filing, DigitalOcean expects its IPO to price between $44 and $47 per share. The price range is a coup for the company’s private investors, who as recently as the company’s 2020 Series C paid about $10.59 each for the company’s shares. Andreessen Horowitz is going to do very well, having led the company’s Series A at a per-share price of just more than $2. IA Ventures, which led DigitalOcean’s seed round, according to Crunchbase, paid just $0.26 per share back in the 2012-2013 time frame. That’s going to convert well.
In valuation terms, the company’s simple share count post-IPO will be 105,303,340, or 107,778,340 if its underwriters purchase their option. At $44 to $47 per share, DigitalOcean is worth $4.72 billion to $5.07 billion, including shares designated for its underwriters.
The company’s fully diluted valuation is higher. At midpoint, Renaissance Capital estimates DigitalOcean’s diluted valuation is $5.6 billion. That works out to a little under $5.8 billion at $47 per share.
Taking a look at DigitalOcean’s Q4 2020 revenue of $87.5 million, the company closed last year on a run rate of $350 million. Or a revenue multiple of 14.5x at the upper end of its nondiluted valuation, and around 16.5x at the upper bound of its diluted worth.
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Ordermark, the online-delivery order management service for restaurants, raises $18 million
Los Angeles-based Ordermark, the online delivery management service for restaurants founded by the scion of the famous, family-owned Canter’s Deli, said it has raised $18 million in a new round of funding.
The round was led by Boulder-based Foundry Group. All of Ordermark’s previous investors came back to provide additional capital for the company’s new funding, including: TenOneTen Ventures, Vertical Venture Partners, Mucker Capital, Act One Ventures and Nosara Capital, which led the Series A funding.
“We created Ordermark to help my family’s restaurant adapt and thrive in the mobile delivery era, and then realized that as a company, we could help other restaurants experiencing the same challenges. We’ve been gratified to see positive results come in from our restaurant customers nationwide,” said Alex Canter, in a statement.
A fourth-generation restaurateur, Canter built the technology on the back of his family deli’s own needs. The company has integrated with point of sale systems, kitchen displays and accounting tools, and with last-mile delivery companies.
As the company expands, it’s looking to increase its sales among the virtual restaurants powered by cloud kitchens and delivery services like Uber Eats, Seamless/Grubhub and others, the company said in a statement.
Although the business isn’t profitable, Ordermark is now in more than 3,000 restaurants. The company has integrations with more than 50 ordering services.
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