Think about all your information. Where does it live? On a hard drive, maybe. But for most people and most businesses their data lives somewhere in the cloud. This only rings truer in the modern age, when working from home is the norm. That’s why businesses like Snowflake, a cloud data platform, are booming (and booming enough to go public in 2020). Here’s what we know about the recent Snowflake IPO, including a history of Snowflake funding, when the Snowflake IPO date is and what investors should know.
TL;DR
- Snowflake is a cloud computing and data warehouse company that was founded in 2012. It became generally available in 2015. Since then, they’ve landed on a number of hotlists from companies like Forbes and CNBC.
- Snowflake fundraising has earned the company about $1.4 billion. Its most recent round led to a valuation of $12.5 billion.
- Some of Snowflake’s most prominent backers include Berkshire Hathaway and Salesforce Ventures. They also have plenty of big name underwriters guiding them through the IPO process.
- Snowflake’s projected price per share will be around $80, and the stocks will trade under the ticker SNOW on the NYSE.
- You can learn more about IPOs here.
A brief history of Snowflake
Founded less than a decade ago in 2012 by a trio of industry experts (Marcin Zukowski, Benoit Dageville and Thierry Cruanes), Snowflake Inc. forewent the typical Silicon Valley route for tech companies, opting instead for a home south of the city in San Mateo, California. Dageville and Cruanes once worked at Oracle, while Zukowski co-founded Vectorwise.
The company offers cloud computing and data storage solutions through custom software that their developers actually built from scratch. On the consumer end, their offerings are undeniably user friendly, despite the complexity that lies within. Their goal, they say, is to allow “any user to work with any data, without limits on scale, performance or flexibility.” Long story short, we’re not looking at software as a service, but rather “data warehouse-as-a-service”.
As for their name, Snowflake derived from a pretty simple notion: all three founders are snowsport fanatics. Is it sheer coincidence that snowflakes themselves come from clouds? Maybe so, but I wouldn’t put it past them. Their offering was generally available by 2015, a year when 80 different organizations were using Snowflake.
You may actually be familiar with Snowflake’s platform, even if you don’t know it. Amazon S3 has been using their technology since 2014, and Microsoft Azure has been since 2018. In 2019, Google Cloud Platform started using it. Even Snowflake’s greatest competitors, it seems, are on their side.
Within just a few years, Snowflake was getting recognized in the press on a regular basis for their groundbreaking work. In 2019, Forbes magazine highlighted Snowflake in their Cloud 100 list, giving the company the second slot. By 2020, Snowflake was an undeniable market provocateur, having landed itself on the CNBC Disruptor 50 list in the 40th spot (CNBC called Snowflake “a data warehouse in the cloud”). In the first half of fiscal year 2020, they earned a revenue of $242 million, which is a big jump from the previous year’s first half.
The company has been through a few CEO’s. They’re currently on their third. Frank Slootman joined the executive ranks in May 2019 and started pushing for a Snowflake IPO within that same year.
Fundraising at Snowflake
The first few years of Snowflake’s life was pretty stealthy. Their angel round of funding happened during this time, but it wasn’t long before they shined a light on what goes on behind the curtains.
- 2014 Series B: $26 million from Redpoint Ventures, Sutter Hill Ventures and Wing Ventures
- 2015 Series C: $45 million from Altimeter Capital and existing investors
- 2017 Series D: $100 million from Ioniq Capital, Madrona Venture Group and existing investors
- 2018 Series E: $263 million from Sequoia Capital and existing investors (investors valued the business at $1.5 billion, giving it unicorn status)
- Series F: $450 million from Sequoia Capital and existing investors (their valuation bumped up to $3.5 billion at this point)
- 2020 Series G: $479 million from lead investor Dragoneer Investment Group, plus Meritech Capital Partners and Salesforce Ventures (investors valued the company at $12.5 billion, ultimately deeming the company a “decacorn”)
In total, Snowflake Inc. has fundraised upwards of $1.4 billion from venture capitalists.
Path to the Snowflake IPO
Slootman noted the company’s successful fundraising efforts, saying that the move to go public is the logical next step in capital acquisition. It may also have something to do with their current employees and investors who have hefty shares they’re looking to bank on but that’s just speculation.
According to the company’s form S-1, or registration statement to the Securities and Exchange Commission (SEC), market mogul Berkshire Hathaway has already agreed to buy $250 million in Snowflake IPO stocks privately. Snowflake has current shareholders, and Berkshire Hathaway is also purchasing 4.04 million shares from an anonymous stakeholder on the secondary market. Warren Buffet is largely a fan of value investing, and while he may not have made this move personally, his company’s direct involvement sure makes it seem like the Snowflake IPO has a lot of potential.
Salesforce Ventures is another company that’s diving into the Snowflake IPO for $250 million.
As for who’s underwriting the IPO, Snowflake has a whole slew of backers to help them get through the process. Here are the main players in alphabetical order:
- Allen & Company
- Barclays
- Citi
- Credit Suisse
- Deutsche Bank
- Goldman Sachs (lead)
- J.P. Morgan
- Mizuho Securities
- Morgan Stanley
- Truist Securities
With all this in mind, it seems like Snowflake has a team of supporters to propel them safely into public terrority. After they land, however, it’s all the market’s say.
Next steps for the Snowflake IPO
Based on the S-1, we can expect Snowflake’s price per share to be around $75$85 by the time the company arrives on the market. With that number in mind, Snowflake’s market capitalization would hit upwards of $23.7 billion by the time it goes public, which is nothing to be shy about.
What about that Salesforce investment of $250 million? In the past, Salesforce Ventures has bought up shares like crazy before a company goes public (we’re talking Zoom and Dropbox, just to name a couple). Then, they sold the majority of them on the primary market. It’s highly plausible they’ll do the same with Snowflake.
Because of all the buzz surrounding Snowflake’s move, experts expect the company’s IPO to help them raise nearly $3 billion in capital. That’s impressive for a startup company.
And when the time does come for the Snowflake IPO to rollout in all its glory, you’ll see the ticker symbol SNOW on the New York Stock Exchange (NYSE). If all goes according to plan, Snowflake will also be the largest software IPO to date but their entrance into the public domain, and their performance thereafter, will tell us for sure.
Snowflake IPO date: What we know
Since their August 24 filing, the Snowflake IPO date is on the horizon. We already have a projected price range from the company’s S-1, but investors can expect a finalized per-share value on September 15, 2020.
With that in mind, we may see SNOW on the NYSE as early as September or October but it’s not finalized. Snowflake executives want the market conditions to be right for their leap into the public domain, and understandably so. In such a volatile time for the economy, it’s truly “anything goes”.
What investors should know
As promising as the Snowflake IPO seems on the surface and it very well may be IPOs are generally riskier than your typical investment. Price changes happen quickly with new market additions, and large investors often practice flipping investments as demand for the stock increases.
For the long term, it’s also important to know why a company is going public. Are they looking to get out of debt or simply expand? As tedious as it may sound, you can find out this kind of information by studying the company’s prospectus. When it’s your money on the line, research is a smart move.
Bottom line
An increasing number of companies are switching to cloud-based software to run their business. According to Gartner, the world’s public cloud service market is worth more than $260 billion, up from $196.7 billion in 2018. If this trend continues, the Snowflake IPO could be the next big thing. But until SNOW is trading on the market, there’s no way to know for sure. IPOs always carry risk, even when the prospects look promising.
As an investor, it’s up to you to read the initial prospectus, use tools like EDGAR to stay up to date on company happenings and ultimately decide whether the Snowflake IPO and any stock is right for you.