Buy or spend? The pros and cons of investing in 9 upcoming tech IPOs from Palantir to Asana
No tech company in California’s famous start-up pool, Silicon Valley, has gone public since last year. This could be because some 2019 Silicon Valley IPOs like Uber and Lyft have failed. But investors have short memories, and this week a half a dozen startups from the valley listed on the stock exchange. About another half-dozen tech startups from other regions also announced their IPO plans this week.
Here are some key stats and pros and cons that investors might want to weigh against Palantir, Asana, Snowflake, and the rest of the upcoming class of late 2020 tech IPOs. Each company description includes a link to his S-1 file. All financial data is as of 2019, unless otherwise indicated.
2019 revenue: $ 743 million
Revenue growth: 25%
Gross margin: 67%
Net loss: $ 580 million
Founded in 2003, Palantir created software to help defense and intelligence analysts sift through massive amounts of information to catch terrorists. It has since diversified to also offer big data analysis software to commercial and undefended customers. Co-founder and CEO Alex Karp moves company headquarters to Denver and took photos of Silicon Valley culture in a letter accompanying the IPO filing. “We seem to share less and less the values and commitments of the technology sector,” he wrote. The company is make public via a direct list.
Benefits: Palantir has become synonymous with uncovering fraud and wrongdoing, a need that is unlikely to diminish, given human nature. As the world becomes more and more digital, Palantir has more and more data to analyze. It is on track to hit $ 1 billion in annual revenue soon.
The inconvenients: Palantir has been in business for almost two decades and is not yet profitable, with substantial research and development spending accounting for almost half of its revenue, although it has fallen to less than a third at first. semester 2020. is encountering controversy over some of its clients such as ICE. Palantir is already valued at $ 20 billion by its backers.
2019 revenue: $ 143 million
Revenue growth: 86%
Gross margin: 86%
Net loss: $ 119 million
Asana was founded in 2008 by the former Facebook co-founder Dustin Moskovitz. Its subscription software helps employees communicate and coordinate projects, avoiding long chains of email. The company becomes public via a direct list.
Benefits: The company already has 1.2 million paying users. Customers generally increase their use of the platform once they log in. Asana’s net dollar retention rate, which measures how much customers spent in a quarter compared to what the same customers spent a year earlier, is over 120% for 2020.
The inconvenients: There is a lot of competition for organizing the tasks of knowledge workers, ranging from giants like Microsoft and Google to Slack and Smartsheet.
2019 revenue: $ 1.1 billion
Revenue growth: 17%
Gross margin: 20%
Net loss: $ 8 million
Corsair sells personal computers and associated peripherals for video gamers and other high performance users. Founded in 1994, the company was bought for $ 525 million in 2017 by a group of investors led by EagleTree Capital. The company is IPO as part of a traditional IPO.
Benefits: Spending on video games is booming during the pandemic, and Corsair is one of the leading providers of premium PCs sought after by gamers. The company was profitable in the first half of 2020 and will use the proceeds of the IPO to repay its debt, which will further strengthen its results.
The inconvenients: Selling PCs is a highly competitive business and subject to rapid technological change.
2019 revenue: $ 265 million (fiscal year ended January 31, 2020)
Revenue growth: 174%
Gross margin: 56%
Net loss: $ 349 million
Founded in 2012 by a former Oracle developers, Snowflake seeks nothing less than to reinvent the database for the era of cloud computing. New CEO Frank Slootman quickly increased his sales force. This is IPO as part of a traditional IPO.
Benefits: Snowflake has been one of the fastest growing applications in business, helping customers mine large amounts of data faster and cheaper than older solutions. Its net income retention rate was 169% last year.
The inconvenients: Slootman’s sales surge resulted in massive sales and marketing spend that exceeded last year’s revenue (but not in the first half of 2020). Many other companies see the same opportunity, including the top three cloud providers, Amazon, Google and Microsoft, plus Oracle itself. Snowflake’s software runs on servers from major cloud providers, so in a sense Snowflake is dependent on its major competitors.
2019 revenue: $ 155 million (fiscal year ended January 31, 2020)
Revenue growth: 50%
Gross margin: 71%
Net loss: $ 92 million
The 10-year-old cloud service seeks to help businesses monitor key metrics and real-time information for everything from customer sales to cybersecurity intrusions. It says it monitors 19 billion events per second for its clients. Sumo Logic is go public via a traditional IPO.
Benefits: Growing trends in smart machines, or the Internet of Things, and the use of artificial intelligence and machine learning applications mean that Sumo Logic is expected to remain in high demand by a growing customer base.
The inconvenients: There is a lot of competition to leverage IoT and AI. for companies from rivals ranging from Splunk, Elastic and Datadog to Amazon and Microsoft.
2019 revenue: $ 542 million
Revenue growth: 42%
Gross margin: 78%
Net loss: $ 163 million
Unity, founded in 2004, provides the software foundation for many popular real-time and mobile video games, including Township, Monument Valley, and Oddworld. The company claims that 53% of the top 1000 games on Apple and Google’s mobile app stores use its software. The company considering a traditional IPO.
Benefits: Mobile gaming remains a rapidly growing market and Unity is expanding into other areas such as virtual reality experiences. Epic Games, a competitor, recently put its reputation on the line by suing Apple.
The inconvenients: In business for 16 years, Unity is still losing money. As rival Epic has discovered, Apple and Google can set onerous terms for game developers on their dominant mobile platforms.
2019 revenue: $ 737 million
Revenue growth: 6%
Gross margin: 80%
Net profit: $ 103 million
Bentley Systems is a leading developer of software for the design, construction and operation of large infrastructure projects such as stadiums, dams and airports. It was founded by the Bentley brothers – Barry, Keith, Ray and Greg – in 1984. German Conglomerate Siemens also owns a stake in the company. Bentley is do a traditional IPO.
Benefits: The company is a market leader in major construction project software and has partnered with Siemens and Microsoft. Bentley’s net recurring revenue retention rate was 110% over the past year. The business has been profitable for years.
The inconvenients: The construction of infrastructure depends on a strong economic climate. The company’s turnover has not increased much in recent years. All of the shares sold come from existing shareholders, so the company will not have the money to grow.
2019 revenue: $ 149 million
Revenue growth: 31%
Gross margin: 54%
Net loss: $ 88 million
Also known as American Well, the 14-year-old startup is a leader in telehealth, helping to connect doctors and nurses to patients through its software platform. The COVID-19 pandemic has created a period of prosperity for Amwell: of the 5.6 million telehealth visits it has received since its inception, 2.9 million, or 52%, have been received in the first half of this year. Google is an investor in the company, which makes a traditional IPO.
Benefits: As noted, the pandemic is causing a massive shift to virtual health care visits which are expected to continue even after COVID-19 is gone. The company maintains relationships with 150 leading healthcare systems, including more than 2,000 hospitals.
The inconvenients: The company has significant losses to its revenues despite its long track record. Healthcare is also a highly regulated business, and restrictions on the use of telehealth, some of which were relaxed during the pandemic, could be tightened.
2019 revenue: $ 105 million
Revenue growth: 65%
Gross margin: 81%
Net loss: $ 5 million
The Israeli company, founded in 2008, provides software to help programmers update and maintain their products. The company makes a traditional IPO.
Benefits: The company is virtually profitable, reporting a loss of less than $ 500,000 for the first half of 2020. Its net income retention rate was 139%.
The inconvenients: The style of software development supported by JFrog is not how most developers release programs today and may not catch on.
More to read absolutely financial cover of Fortune:
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- 12 value stocks to buy now—And 3 to avoid – according to Bank of America
- “Decade Agreement”: How buying TikTok could transform Microsoft
- American Airlines announces its intention to cut 19,000 jobs—Unless Congress extends pandemic aid
- Sacramento could pay workers infected with COVID $ 1000 to stay at home