Data analytics is a rapidly growing market.
Valued at $30 billion in 2018, it is expected to reach $105 billion by 2027 at a CAGR of 12.3% from 2019 to 2027.
Snowflake Inc – dubbed the data cloud – is arguably one of the most anticipated tech IPOs of recent years.
1 – A Data Warehouse for Big Business
Snowflake was founded in 2012 by data warehousing experts Benoit Dageville, Thierry Cruanes and Marcin Zukowski. It is a cloud-based data warehousing company which allows corporate clients to store and analyze data using cloud-based hardware and software.
The software was built from the ground up to allow “any user to work with any data, without limits on scale, performance or flexibility“. The result is a powerful but easy to use platform which enables users to share and analyze semi-structured and structured data very quickly.
One interesting feature of Snowflake’s business model is that there is no monthly or yearly subscription to pay: users pay for the time they spend using the platform. This allows smaller businesses to use the software at a reasonable price, and increase their use time as they grow. Contrary to many of its competitors, there is no cost barrier to entry for using the Snowflake software.
2 – An Immediate Success
Initially, the company functioned in stealth mode before making its cloud data warehouse accessible to the mass market in 2015.
The company quickly racked up the honors and milestones:
- Won 1st place at the 2015 Strata + Hadoop World startup competition
- Ranked 2nd on Forbes’ Cloud 100 list in 2019
- Ranked 1st on LinkedIn’s 2019 U.S. list of Top Startups
- Ranked 2nd on Forbes’ best private cloud companies in 2019
- Milestone in 2019: Snowflake has 1400 employees
- Milestone in 2020: Snowflake has 4,000 active customers, including Capital One and Adobe
Today, Snowflake’s clients include household names such as EA, Looker, Micron, Square, Logitech, Capital one and Yamaha and Deliveroo. A young company who boast such prestigious clients must be doing something right.
Snowflake is still unprofitable but management says profitability is only 1-2 years away.
3 – Venture Capital Loves the Company
Before coming out of stealth mode, Snowflake managed to raise a respectable $26 million. Since that first capital raise, Snowflake has continued to raise ever-increasing amounts of capital:
- $45M raised in June 2015.
- $100M raised in April 2017
- $263M raised in January 2018, bringing the valuation to $1.5 billion (unicorn status)
- $450M raised in October 2018, bringing the valuation to $3.5 billion
- $479M raised in February 2020, bringing the valuation to $12.4B.
Snowflake’s institutional investors include Dragoneer Investment Group and Salesforce Ventures, Sequoia, ICONIQ Capital, Altimeter Capital, Redpoint Ventures and Sutter Hill Ventures.
It’s clear that institutions are enthusiastic about Snowflake’s business model and growth prospects. CEO Frank Slootman says that going public is the next logical step but that there is no rush to do so. However, he did admit that insiders are pushing for an IPO in order to capitalize on their share holdings and equity.
Thus, a public offering is a question of when rather than if.
Conclusion: Should You Invest?
A near $20 billion valuation means the company is an important big data player. The global analytics market is expected to triple in the next seven years and Snowflake is very well positioned to capture a significant share of that growth.
In addition, the coronavirus pandemic has accelerated the transition to “digital everything” and cloud computing software goes hand in hand with the current work from home trend.
Since Snowflake filed a confidential IPO, we don’t yet know how much equity it will be selling nor at what price. We have to wait for an IPO prospectus to be released or for insiders to reveal that information. I for one am very excited at the possibility of investing in an innovative and popular tech company with heavy institutional backing.
Thank you for reading.
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DISCLAIMER: This article is the fruit of my personal research and should not be viewed as financial advice. I enjoy analyzing stocks and providing investment ideas but I highly encourage you to conduct your own research before investing in any asset. NEVER invest without having done proper due diligence and NEVER invest out of the Fear Of Missing Out (FOMO). Also, NEVER invest because some internet message boards are hyping up a high-flying stock. As a rule of thumb, the number of rockets included in a tweet are inversely proportional to the quality of the advice given.