Snowflake
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Real-time database platform SingleStore raises $80M more, now at a $940M valuation
Organizations are swimming in data these days, and so solutions to help manage and use that data in more efficient ways will continue to see a lot of attention and business. In the latest development, SingleStore — which provides a platform to enterprises to help them integrate, monitor and query their data as a single entity, regardless of whether that data is stored in multiple repositories — is announcing another $80 million in funding, money that it will be using to continue investing in its platform, hiring more talent and overall business expansion. Sources close to the company tell us that the company’s valuation has grown to $940 million.
The round, a Series F, is being led by Insight Partners, with new investor Hewlett Packard Enterprise, and previous backers Khosla Ventures, Dell Technologies Capital, Rev IV, Glynn Capital and GV (formerly Google Ventures) also participating. The startup has to date raised $264 million, including most recently an $80 million Series E last December, just on the heels of rebranding from MemSQL.
The fact that there are three major strategic investors in this Series F — HPE, Dell and Google — may say something about the traction that SingleStore is seeing, but so too do its numbers: 300%+ increase in new customer acquisition for its cloud service and 150%+ year-over-year growth in cloud.
Raj Verma, SingleStore’s CEO, said in an interview that its cloud revenues have grown by 150% year over year and now account for some 40% of all revenues (up from 10% a year ago). New customer numbers, meanwhile, have grown by over 300%.
“The flywheel is now turning around,” Verma said. “We didn’t need this money. We’ve barely touched our Series E. But I think there has been a general sentiment among our board and management that we are now ready for the prime time. We think SingleStore is one of the best-kept secrets in the database market. Now we want to aggressively be an option for people looking for a platform for intensive data applications or if they want to consolidate databases to one from three, five or seven repositories. We are where the world is going: real-time insights.”
With database management and the need for more efficient and cost-effective tools to manage that becoming an ever-growing priority — one that definitely got a fillip in the last 18 months with COVID-19 pushing people into more remote working environments. That means SingleStore is not without competitors, with others in the same space, including Amazon, Microsoft, Snowflake, PostgreSQL, MySQL, Redis and more. Others like Firebolt are tackling the challenges of handing large, disparate data repositories from another angle. (Some of these, I should point out, are also partners: SingleStore works with data stored on AWS, Microsoft Azure, Google Cloud Platform and Red Hat, and Verma describes those who do compute work as “not database companies; they are using their database capabilities for consumption for cloud compute.”)
But the company has carved a place for itself with enterprises and has thousands now on its books, including GE, IEX Cloud, Go Guardian, Palo Alto Networks, EOG Resources and SiriusXM + Pandora.
“SingleStore’s first-of-a-kind cloud database is unmatched in speed, scale, and simplicity by anything in the market,” said Lonne Jaffe, managing director at Insight Partners, in a statement. “SingleStore’s differentiated technology allows customers to unify real-time transactions and analytics in a single database.” Vinod Khosla from Khosla Ventures added that “SingleStore is able to reduce data sprawl, run anywhere, and run faster with a single database, replacing legacy databases with the modern cloud.”
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SentinelOne’s upgraded IPO pricing is good news for Tiger, public markets and your local VC
As the second quarter races to a close, we’re down to the wire for IPOs looking to get out before June ends. One such company is SentinelOne, a cybersecurity startup backed by Insight Venture Partners, Redpoint, Tiger Global Management, Data Collective and Anchorage Capital, among others.
SentinelOne raised an ocean of capital while private, including nearly $500 million across two rounds in 2020. Its debut is therefore a huge liquidity event for a host of investing groups. And today, the cybersecurity unicorn had good news in the form of an upgrade to its IPO price range.
The Exchange explores startups, markets and money. Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.
Last week, The Exchange wrote that the company’s IPO would be a “good heat check for the IPO market” given its rapid growth and pace of losses. How investors valued it would help explain the public market’s current appetite for loss-making startups. Today’s news implies healthy appetites.
SentinelOne raised its IPO price range this morning from $26 to $29 per share to $31 to $32 per share, a sizable lift to its valuation and IPO raise.
This morning, we’re unpacking the company’s new valuation range, thinking about SentinelOne’s growth and revenue results compared to similar public companies, and working to understand if the company is inexpensive, neutrally priced or expensive compared to current comps. Sound fun? It will be!
What’s SentinelOne worth?
Recall that when SentinelOne last raised capital it was valued at $2.7 billion on a pre-money basis. The company was therefore worth just under $3 billion after the $267 million round. The unicorn is going to yeet that figure into space in its IPO, barring something catastrophic.
Its new IPO price range of $31 to $32 per share values the company on a much richer basis. With an anticipated simple share count of 253,530,006 after its IPO, inclusive of a private placement, the company would be worth $7.86 billion to $8.11 billion.
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Once a buzzword, digital transformation is reshaping markets
The notion of digital transformation evolved from a buzzword joke to a critical and accelerating fact during the COVID-19 pandemic. The changes wrought by a global shift to remote work and schooling are myriad, but in the business realm they have yielded a change in corporate behavior and consumer expectation — changes that showed up in a bushel of earnings reports this week.
TechCrunch may tend to have a private-company focus, but we do keep tabs on public companies in the tech world as they often provide hints, notes and other pointers on how startups may be faring. In this case, however, we’re working in reverse; startups have told us for several quarters now that their markets are picking up momentum as customers shake up their buying behavior with a distinct advantage for companies helping customers move into the digital realm. And public company results are now confirming the startups’ perspective.
The accelerating digital transformation is real, and we have the data to support the point.
What follows is a digest of notes concerning the recent earnings results from Box, Sprout Social, Yext, Snowflake and Salesforce. We’ll approach each in micro to save time, but as always there’s more digging to be done if you have time. Let’s go!
Enterprise earnings go up
Kicking off with Yext, the company beat expectations in its most recent quarter. Today its shares are up 18%. And a call with the company’s CEO Howard Lerman underscored our general thesis regarding the digital transformation’s acceleration.
In brief, Yext’s evolution from a company that plugged corporate information into external search engines to building and selling search tech itself has been resonating in the market. Why? Lerman explained that consumers more and more expect digital service in response to their questions — “who wants to call a 1-800 number,” he asked rhetorically — which is forcing companies to rethink the way they handle customer inquiries.
In turn, those companies are looking to companies like Yext that offer technology to better answer customer queries in a digital format. It’s customer-friendly, and could save companies money as call centers are expensive. A change in behavior accelerated by the pandemic is forcing companies to adapt, driving their purchase of more digital technologies like this.
It’s proof that a transformation doesn’t have to be dramatic to have pretty strong impacts on how corporations buy and sell online.
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Snowflake gave up its dual-class shares. Should you?
Snowflake announced earlier this month that it would give up its dual-class shareholder structure, a corporate governance setup that often gives founders and executives superior voting rights, typically involving 10 times as many votes for their own shares as others receive. The mechanism can enable founders to maintain control despite later dilution and may sometimes even grant ironclad control to an individual in perpetuity.
For many companies, these supervoting shares represent a highly powerful tool, allowing founders to have their cake and eat it, too — to go public and receive the advantages of being a public company while limiting the power of external shareholders to influence how they run the company once it floats.
Some founders and their investors argue that these preferred shares protect them from the short-term whims of the market, but the perspective isn’t universally accepted.
Some founders and their investors argue that these preferred shares protect them from the short-term whims of the market, but the perspective isn’t universally accepted. Dual-class shares are a controversial governance structure, and some wonder if they are setting up an unfair playing field by allowing a cabal to wield outsized power.
Why would Snowflake give up such a powerful tool a mere six months after it went public? We decided to look at the notion of dual-class shares and why Snowflake may have been willing to let them go.
Snowflake’s decision
If one of the primary purposes of dual-class shares is to consolidate CEO power, then perhaps Snowflake felt they weren’t necessary, given the history of CEO-shuffling at the company. While Snowflake’s founders are still part of the organization, they hired Sutter Hill investor Mike Speiser to be their first CEO, followed by former Microsoft exec Bob Muglia before finally bringing in veteran CEO Frank Slootman to take their company public.
Without an all-powerful CEO founder in place, perhaps the company felt that supervoting shares weren’t necessary. Regardless, Snowflake CFO Mike Scarpelli framed the move as a decision that works for all parties when he announced that his company would abandon the special shares during its earnings call earlier this month.
“Today, we announced that on March 1st, 2021, our Class B shareholders in accordance with our governing documents converted all of our Class B common stock to Class A common stock, eliminating the dual-class structure of our common stock and ensuring that each share has an equal vote. We view this as operationally beneficial to the company and our shareholders,” Scarpelli said during the call.
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Snowflake latest enterprise company to feel Wall Street’s wrath after good quarter
Snowflake reported earnings this week, and the results look strong with revenue more than doubling year-over-year.
However, while the company’s fourth quarter revenue rose 117% to $190.5 million, it apparently wasn’t good enough for investors, who have sent the company’s stock tumbling since it reported Wednesday after the bell.
It was similar to the reaction that Salesforce received from Wall Street last week after it announced a positive earnings report. Snowflake’s stock closed down around 4% today, a recovery compared to its midday lows when it was off nearly 12%.
Why the declines? Wall Street’s reaction to earnings can lean more on what a company will do next more than its most recent results. But Snowflake’s guidance for its current quarter appeared strong as well, with a predicted $195 million to $200 million in revenue, numbers in line with analysts’ expectations.
Sounds good, right? Apparently being in line with analyst expectations isn’t good enough for investors for certain companies. You see, it didn’t exceed the stated expectations, so the results must be bad. I am not sure how meeting expectations is as good as a miss, but there you are.
It’s worth noting of course that tech stocks have taken a beating so far in 2021. And as my colleague Alex Wilhelm reported this morning, that trend only got worse this week. Consider that the tech-heavy Nasdaq is down 11.4% from its 52-week high, so perhaps investors are flogging everyone and Snowflake is merely caught up in the punishment.
Snowflake CEO Frank Slootman pointed out in the earnings call this week that Snowflake is well positioned, something proven by the fact that his company has removed the data limitations of on-prem infrastructure. The beauty of the cloud is limitless resources, and that forces the company to help customers manage consumption instead of usage, an evolution that works in Snowflake’s favor.
“The big change in paradigm is that historically in on-premise data centers, people have to manage capacity. And now they don’t manage capacity anymore, but they need to manage consumption. And that’s a new thing for — not for everybody but for most people — and people that are in the public cloud. I have gotten used to the notion of consumption obviously because it applies equally to the infrastructure clouds,” Slootman said in the earnings call.
Snowflake has to manage expectations, something that translated into a dozen customers paying $5 million or more per month to Snowflake. That’s a nice chunk of change by any measure. It’s also clear that while there is a clear tilt toward the cloud, the amount of data that has been moved there is still a small percentage of overall enterprise workloads, meaning there is lots of growth opportunity for Snowflake.
What’s more, Snowflake executives pointed out that there is a significant ramp up time for customers as they shift data into the Snowflake data lake, but before they push the consumption button. That means that as long as customers continue to move data onto Snowflake’s platform, they will pay more over time, even if it will take time for new clients to get started.
So why is Snowflake’s quarterly percentage growth not expanding? Well, as a company gets to the size of Snowflake, it gets harder to maintain those gaudy percentage growth numbers as the law of large numbers begins to kick in.
I’m not here to tell Wall Street investors how to do their job, anymore than I would expect them to tell me how to do mine. But when you look at the company’s overall financial picture, the amount of untapped cloud potential and the nature of Snowflake’s approach to billing, it’s hard not to be positive about this company’s outlook, regardless of the reaction of investors in the short term.
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Lacework lands $525M investment as revenue grows 300%
As the pandemic took hold in 2020, companies accelerated their move to cloud services. Lacework, the cloud security startup, was in the right place at the right time as customers looked for ways to secure their cloud native workloads. The company reported that revenue grew 300% year over year for the second straight year.
It was rewarded for that kind of performance with a $525 million Series D today. It did not share an exact valuation, only saying that it exceeded $1 billion, which you would expect on such a hefty investment. Sutter Hill and Altimeter Capital led the round with help from D1 Capital Management, Coatue, Dragoneer Investment Group, Liberty Global Ventures, Snowflake Ventures and Tiger Global Management. The company has now raised close to $600 million.
Lacework CEO Dan Hubbard says one of the reasons for such widespread interest from investors is the breadth of the company’s security solution. “We enable companies to build securely in the cloud, and we span across multiple different categories of markets, which enable the customers to do that,” he said.
He says that encompasses a range of services, including configuration and compliance, security for infrastructure as code, build time and runtime vulnerability scanning and runtime security for cloud native environments like Kubernetes and containers.
As the company has grown revenue, it has been adding employees quickly. It started the year with 92 employees and closed with more than 200, with plans to double that by the end of this year. As he looks at hiring, Hubbard is aware of the need to build a diverse organization, but acknowledges that tech in general hasn’t done a great job so far.
He says they are working with the various teams inside the company to try and change that, while also working to support outside organizations that are helping educate underrepresented groups to get the skills they need and then building from that. “If you can help solve the problem at an earlier stage, then I think you’ve got a bigger opportunity [to have a base of people to hire] there,” he said.
The company was originally nurtured inside Sutter Hill and is built on top of the Snowflake platform. It reports that $20 million of today’s total comes from Snowflake’s new venture arm, which is putting some money into an early partner.
“We were an alpha Snowflake customer, and they were an alpha customer of ours. Our platform is built on top of the Snowflake data cloud and their new venture arm has also joined the round with an investment to further strengthen the partnership there,” Hubbard said.
As for Sutter Hill, investor Mike Speiser sees Lacework as one of his firm’s critical investments. “[Much] like Snowflake at a similar point in its evolution, Lacework is growing revenue at over 300% per year making Lacework one of Sutter Hill Ventures’ most important and promising portfolio companies,” he said in a statement.
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Mozart Data lands $4M seed to provide out-of-the-box data stack
Mozart Data founders Peter Fishman and Dan Silberman have been friends for over 20 years, working at various startups, and even launching a hot sauce company together along the way. As technologists, they saw companies building a data stack over and over. They decided to provide one for them and Mozart Data was born.
The company graduated from the Y Combinator Summer 2020 cohort in August and announced a $4 million seed round today led by Craft Ventures and Array Ventures with participation from Coelius Capital, Jigsaw VC, Signia VC, Taurus VC and various angel investors.
In spite of the detour into hot sauce, the two founders were mostly involved in data over the years and they formed strong opinions about what a data stack should look like. “We wanted to bring the same stack that we’ve been building at all these different startups, and make it available more broadly,” Fishman told TechCrunch.
They see a modern data stack as one that has different databases, SaaS tools and data sources. They pull it together, process it and make it ready for whatever business intelligence tool you use. “We do all of the parts before the BI tool. So we extract and load the data. We manage a data warehouse for you under the hood in Snowflake, and we provide a layer for you to do transformations,” he said.
The service is aimed mostly at technical people who know some SQL like data analysts, data scientists and sales and marketing operations. They founded the company earlier this year with their own money, and joined Y Combinator in June. Today, they have about a dozen customers and six employees. They expect to add 10-12 more in the next year.
Fishman says they have mostly hired from their networks, but have begun looking outward as they make their next hires with a goal of building a diverse company. In fact, they have made offers to several diverse candidates, who didn’t ultimately take the job, but he believes if you start looking at the top of the funnel, you will get good results. “I think if you spend a lot of energy in terms of top of funnel recruiting, you end up getting a good, diverse set at the bottom,” he said.
The company has been able to start from scratch in the midst of a pandemic and add employees and customers because the founders had a good network to pitch the product to, but they understand that moving forward they will have to move outside of that. They plan to use their experience as users to drive their message.
“I think talking about some of the whys and the rationale is our strategy for adding value to customers […], it’s about basically how would we set up a data stack if we were at this type of startup,” he said.
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2020 IPO report card: Are tech’s newest public companies meeting expectations?
As the American election looms and the IPO cycle slows some, it’s a good time to review how well the public offerings we have seen thus far have performed.
The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.
Welcome to a Monday morning data rundown discussing how well the latest-stage startups that went public this year have performed after their first day. We’ll be awarding letter grades for post-IPO performance as well, because we can.
So, how did Snowflake do compared to Vroom, both stacked next to JFrog and One Medical? Let’s find out.
Ranking 2020’s IPOs
The fine folks at my former publication Crunchbase News have a running list of 2020 IPOs, which will help us not miss any names. Of course, we’re not going to include every possible deal; there have been some marginal debuts that we can leave behind.
But, the majors matter. So let’s get into them now:
- Snowflake: It priced above its raised range. Then it went up sharply. From an IPO price of $120 per share, Snowflake is worth $250 per share today. That’s so expensive, compared to the data-focused Snowflake’s revenue, that I can hardly figure out what the hell its price means. The company’s valuation got so rich that we wrote that all tech companies should go public to take advantage of the rich market. This year’s standout IPO. A+.
- Unity: Unity’s IPO was a source of wonder for those curious about the economics of the gaming world. For us finance dorks, it was also a right corker. We were impressed. So were investors. After setting a $34 and $42 per share IPO range, Unity raised it to $44 and $48 per share. Then it went public at $52 per share. Today it’s worth $94.50 per share, or around $25 billion. It was priced at $6 billion, give or take, in its final private round. A huge win of an IPO. A.
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The highest valued company in Bessemer’s annual cloud report has defied convention by staying private
This year’s Bessemer Venture Partners’ annual Cloud 100 Benchmark report was published recently and my colleague Alex Wilhelm looked at some broad trends in the report, but digging into the data, I decided to concentrate on the Top 10 companies by valuation. I found that the top company has defied convention for a couple of reasons.
Bessemer looks at private companies. Once they go public, they lose interest, and that’s why certain startups go in and out of this list each year. As an example, Dropbox was the most highly valued company by far with a valuation in the $10 billion range for 2016 and 2017, the earliest data in the report. It went public in 2018 and therefore disappeared.
While that $10 billion benchmark remains a fairly good measure of a solidly valued cloud company, one company in particular blew away the field in terms of valuation, an outlier so huge, its value dwarfs even the mighty Snowflake, which was valued at over $12 billion before it went public earlier this month.
That company is Stripe, which has an other-worldly valuation of $36 billion. Stripe began its ascent to the top of the charts in 2016 and 2017 when it sat behind Dropbox with a $6 billion valuation in 2016 and around $8 billion in 2017. By the time Dropbox left the chart in 2018, Stripe would have likely blown past it when its valuation soared to $20 billion. It zipped up to around $23 billion last year before taking another enormous leap to $36 billion this year.
Stripe remains an outlier not only for its enormous valuation, but also the fact that it hasn’t gone public yet. As TechCrunch’s Ingrid Lunden pointed out in an article earlier this year, the company has remained quiet about its intentions, although there has been some speculation lately that an IPO could be coming.
What Stripe has done to earn that crazy valuation is to be the cloud payment API of choice for some of the largest companies on the internet. Consider that Stripe’s customers include Amazon, Salesforce, Google and Shopify and it’s not hard to see why this company is valued as highly as it is.
Stripe came up with the idea of making it simple to incorporate a payments mechanism into your app or website, something that’s extremely time-consuming to do. Instead of building their own, developers tapped into Stripe’s ready-made variety and Stripe gets a little money every time someone bangs on the payment gateway.
When you’re talking about some of the biggest companies in the world being involved, and many others large and small, all of those payments running through Stripe’s systems add up to a hefty amount of revenue, and that revenue has led to this amazing valuation.
One other company you might want to pay attention to here is UIPath, the robotic process automation company, which was sitting just behind Snowflake with a valuation of over $10 billion. While it’s unclear if RPA, the technology that helps automate legacy workflows, will have the lasting power of a payments API, it certainly has come on strong the last couple of years.
Most of the companies in this report appear for a couple of years as they become unicorns, watch their values soar and eventually go public. Stripe up to this point has chosen not to do that, making it a highly unusual company.
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Warren Buffett invests in an unprofitable business
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.
The whole crew was back, with Natasha Mascarenhas and Danny Crichton and myself chattering, and Chris Gates behind the scenes tweaking the dials as always. This week was a real team effort as we are heading into the maw of Disrupt — more here, see you there — but there was a lot of news all the same.
So, here’s what we got to:
- AngelList is doubling down on rolling funds, driving that SaaS revenue into the firm that is also investing in the rolling funds. So that’s neat. (Really!)
- Edtech stayed hot this week with Byju’s raising $500 million from Silver Lake. Founded back in 2011, Byju’s is the highest-valued edtech company that we can think of, now worth $10.8 billion.
- And speaking of Silver Lake, the group just poured $1 billion into a part of the Reliance empire, this time Reliance Retail. And we talked about JioMart, which is taking on both Flipkart and Amazon in the country.
- Next there were two companies with names that start with “S” that raised $100 million in the last week, namely Snyk — more here — and Sprinklr — more here.
- Sticking to our “S” theme, Slack’s earnings were incredibly interesting. The company’s quarter didn’t get plaudits from investors, and it did note some negative COVID impacts that could impact startups as well.
- And, one more S-company to get through: Snowflake. We were all a-twitter about the company’s new valuation range and the fact that fucking Berkshire Hathaway is going to invest in it. That’s wild! What a thing!
- Finally on the IPO front, we did a quick Palantir update. Danny has all the latest here.
We wrapped with whatever this is, which was at least good for a laugh. We are back next week at Disrupt, so see you all there!
Equity drops every Monday at 7:00 a.m. PT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.
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