IPO – Matt Turck

Quick S-1 Teardown: Cerebras

Look up in the sky! It’s a bird! It’s a plane! It’s… an IPO. The Cerebras S-1 filing is interesting in many ways, but certainly one is that, well, it is an (upcoming) IPO in the first place. In a context where tech IPOs have been at an all time low, with a very modest uptick in 2024 (Reddit, Rubrik, etc), the fact that a VC-backed tech startup has filed is rare enough to be exciting and newsworthy on its own.

The other unmistakable part of the filing is that Cerebras is a “pure play AI” company, in a context where there’s been a dearth of such companies in public markets, outside of Palantir and arguably a couple of others, like C3 AI or recent entrants like Tempus AI and Astera Labs. For the most part, public market investors have had very limited options to play the Generative AI wave: essentially NVIDIA, and indirect bets on AI through the hyperscalers. (This scarcity of AI stocks and to some extent, data infra stocks, is a reality we captured in 2021 through our MAD Public Company Index, that will soon be worth updating as hopefully more IPOs happen).

Quick S-1 Teardown: Klaviyo

Is this it? Are we back? Everyone in the startup and venture world has been waiting for months for the re-opening of the IPO window. After a record breaking 2021 (1035 IPOs, beating the previous record of 480 in 2020), 2022 saw a dramatic decline (181 IPOs) and 2023 so far has not been much better.

Common wisdom in the market over the last few months has been that Q4 2023 would be the time the IPO window would cautiously re-open for technology companies (recent non-tech IPOs like restaurant chain Cava being considered non-representative). And it would be crucial that some of the very best companies (the usual suspects being Stripe, Databricks and Instacart) would go out first, to pave the way for a bigger wave of quality companies right behind them.

Well, this week has been an exciting one – on Monday, ARM filed its F-1 (here) and just today (Friday August 25), both Instacart (here) and Klaviyo (here) filed their S-1s. It’s going to be exciting to see what happens this Fall in IPO land.

New IPO filings also mean fresh opportunities for the time-honored VC tradition of S-1 breakdowns, even though timing is unfortunate given summer vacation schedule – here and here.

Consistent with my general investing focus on data and ML/AI, I’m going to pick Klaviyo for this first breakdown of 2023, as it’s a heavily data-driven business. As I did in the past (see the S-1 quick teardowns for Snowflake, Palantir, Confluent, C3, nCino), this is meant as a QUICK breakdown – mostly unedited notes and off-the-cuff thoughts, in bullet point format.

Let’s dig in.

Quick S-1 Teardown: Confluent

A member of our Emerging MAD Index of companies on their path to an IPO, Confluent is a very interesting company in a strategic part of the data space, providing infrastructure for real-time data streaming – what it nicely calls “data in motion”, in contrast to the world of batch processing or “data at rest”.

I had the pleasure of hosting the company’s co-founder and then CTO, Neha Narkhede, at Data Driven NYC back in 2016, and her great talk remains entirely relevant to understand the premise behind the company and its core technical foundation.

Confluent recently released its full S-1, and will trade under the stock ticker CFLT on the NASDAQ.

In the same vein as previous “Quick S-1 teardowns” (see Palantir, Snowflake, nCino), here are some high level thoughts and quick highlights, from my colleague John Wu and I.

Quick S-1 Teardown: C3.ai

For anyone following the software industry, there’s been a little bit of snark about C3.ai (“C3”) over the years. Here’s a company that was founded by Silicon Valley royalty (Tom Siebel, who sold Siebel Systems to Oracle in 2006 for just shy of $6B), with seemingly limitless access to capital, that somehow seemed to be pivoting every few years to something new – from energy at first, to the Internet of Things, to Artificial Intelligence.

C3 also largely eschewed the startup echochamber – funded personally by its founder at first, it didn’t raise money from the usual VC suspects, target well-know startups as its first customers, or open source any AI frameworks, working instead with a small group of Fortune 1000 and government customers. As a result, it didn’t build the kind of buzz that often precedes the most notable startups on their way to becoming public.

Lo and behold, what emerges in this IPO is a solid company by enterprise software IPO standards, with $157m in revenue, growing 71% yoy, a 75% gross margin and a $69m loss.

It will be interesting to see how the market reacts to this IPO.

On the one hand, C3 is not growing anywhere as explosively as a Snowflake, and in fact seems to have just had a bad quarter of decelerating growth. There are also other concerns, including account concentration and a substantial loss (not as pronounced as a Snowflake or Palantir, but still on the higher range of the software market).

On the other hand, the tailwinds around the deployment of ML/AI in the enterprise are very strong, and C3 is clearly positioning itself as one of the very first enterprise AI companies to go public: its ticker symbol on the NYSE will be “AI”, and the term “machine learning” is mentioned 56 times in the S-1.

This IPO will be an interesting test for the continued appetite of financial markets for all things AI.

Here’s a quick analysis of the S-1 and main characteristics of the business, put together by my FirstMark colleague John Wu and I.

Quick S-1 Teardown: Palantir

The Palantir S-1 is a long and meaty read, and a pretty fascinating one considering the company was highly secretive, and often controversial, for so many years. It is also written in a very opinionated style: the newly Colorado-based company takes aim at Silicon Valley and is not exactly charitable to its competitors.

Particularly compared to a Snowflake that has had a meteoric rise since inception in 2012 (see our Snowflake teardown here), the Palantir S-1 also presents the picture of a company that, while unique, has had a long road since it was founded in 2003.

It seems that the company went through an important transition in the last couple of years on the product and go to market front – evolving away from a services company into more of a software one – perhaps in anticipation of an IPO.

Ironically, in some ways, this evolution has made Palantir look more like the Silicon Valley companies it feels so different from.

Here are some quick thoughts and notes (from Avery Klemmer and myself)

Quick S-1 Teardown: nCino

[July 14, 2020 IPO update – stock popped + 195% first day of trading, see end of post for details on IPO]

The upcoming nCino IPO is an interesting story, and a good reminder that strong cloud/SaaS companies can be built outside of the usual Silicon Valley or NYC venture path (even with VCs on board)

(As a side note: we often do those S-1 summaries internally to keep tabs on the software IPO market, so my colleague Avery Klemmer and I figured we’d “open source” this one in case it might be interesting to others – thoughts and comments welcome. Our firm FirstMark is not an investor in nCino)

HIGH LEVEL THOUGHTS & LESSONS:

nCino is a refreshing example of a successful software company that’s built a little bit outside of what’s currently in favor in venture capital circles:

Vertical software: Many VCs these days tend to prefer broad horizontal opportunities, with a concern that vertical software ultimately has a limited TAM, even a large one – but nCino is 100% focused on the banking market
Service heavy, no bottoms up GTM: nCino sells its products through AEs , with long sales cycles, and significant implementation services are involved
Platform dependency? Being built on top of someone else’s platform is often a concern for investors. nCino is built on top of Salesforce (like Veeva). They’ve seemingly safeproofed this relationship by reselling Salesforce products in their deals, and raising money from Salesforce, wnich is a large investor.
Not a Silicon Valley or NYC story: Launched in 2012 by executives of North Carolina-based Live Oak Bank as a spin-off venture. Still based in Wilmington, North Carolina
It’s a spinoff from a bank: the company was originally founded as a majority-owned subsidiary of Live Oak Bancshares, a bank holding company. It then raised $9m in seed funding in 2013 from a variety of individuals including John Mack of Morgan Stanley and Chip Mahan, the Chairman of Live Oak Bank. So nCino didn’t have the structure that most VCs like to see, where the founding team has high ownership and the first money in comes from institutional investors. This history as a spin-off is probably the reason why the CEO of the company owned only 1.6% at IPO time, although we don’t know this for sure).

The Significance of the Datadog IPO

The Datadog IPO just happened, and it’s proven to be a resounding success, not surprisingly given the company’s superb metrics – big revenues ($333M ARR), happy customers that keep buying more (146% net revenue retention) and, unlike many others, a history of profitability. To make the story even more epic, it transpired that the company had turned down a last minute big acquisition offer from Cisco shortly before the IPO, which valued the company higher than its proposed IPO range.

While I’m a small personal shareholder in the company and friendly with its founders, this is not going to be a VC victory lap kind of a post, for the simple reason that I did not invest in the company as a VC (as the early rounds of financing took place before my current tenure, in my defense!).

Regardless, I wanted to write a few quick thoughts, as I believe this particular IPO should be loudly celebrated.

Lending Club IPO: Nice Guys Don’t Finish Last, and Other Lessons

The superb Lending Club success story is what the startup world is all about: a software-based reinvention of massive and inefficient industry; a product that puts consumers first and delivers undeniable benefits ; and an entrepreneurial mega-hit that brings incredible riches and returns to its founder and investors.

In some ways, Lending Club is a classic Silicon Valley story; in some other ways, it is pretty atypical. As a friend of Renaud Laplanche’s for over 20 years, I have had a chance to witness from up close some parts of his journey with Lending Club. It is full of interesting lessons for entrepreneurs and the tech industry in general:

Continue reading “Lending Club IPO: Nice Guys Don’t Finish Last, and Other Lessons”