TMT: The IPOs are Coming, The IPOs are Coming

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April 15, 2014

TMT: The IPOs are Coming, The IPOs are Coming

2013 was the biggest year for TMT IPOs since 2007, with 54 companies hitting the market, led by TWTR, but otherwise dominated by enterprise cloud software. 2014 began with a big backlog of 590 venture funded companies in the pipeline, up from 426 a year ago, representative of years of public market angst. 19 IPOs have issued YTD, with several high profile acquisitions as well. This year, the mix includes more consumer names, including 50%+of the IPOs YTD, and with Chinese e-commerce giant Alibaba expected to top FB’s 2012 offering as the biggest debut in history. For investors, we see 2014’s likely IPOs as a mixed bag. To date, intriguing plays like GRUB and OPWR have had strong launches, while riskier issues like KING have foundered. Looking ahead, we are more optimistic for enterprise cloud application plays like Palantir, New Relic and AppDynamics, than for the sub-scale infrastructure plays like Box and platform vulnerable consumer businesses like Dropbox and Evernote. Overall, we are bullish that paradigm shifts in advertising, retail, enterprise IT, entertainment, and telecom are opening huge new addressable markets to new paradigm TMT players, and that most valuations remain reasonable given this growth potential. Given this, strong cash flows and balance sheet liquidity, we believe talk of a new tech bubble is misplaced. On a side note, the IPO market may raise prices and slow the pace of sector M&A. We are adjusting our model portfolio – over the past 4 months, the large cap underperformed by 3200bp, driven by the recent pull back, while the small cap outperformed by 4600bp. FB and DATA are joining the large cap list, replacing CRM and CTXS, while OPWR and GRUB are added to the small cap portfolio, replacing GTAT and TYPE.

  • The window is open. Years of public market weakness had stacked up promising TMT companies in the private market. FB’s botched 2012 IPO held back the growing tide, but 2013 finally saw the window open for new issues. TWTR was the marquee name, but the large majority of 2013 IPOs were well positioned, high growth enterprise cloud software names, such as strong performers DATA and MKTO. However, the 45 TMT IPOs in 2013 did little to alleviate the backlog, with the total pipeline growing from 472 companies at the start of 2013 to 590 a year later. Nearly 2 dozen of these companies carried presumed valuations in excess of $1B, including high profile acquisitions like WhatsApp, Nest and Oculus, and recent new issues KING and GRUB.
  • The calendar of future IPOs is intriguing. The line-up for the remainder of 2014 is could include well-known consumer internet names like Dropbox, AirBnB, Evernote, Gilt, and Pinterst, enterprise application players like Palantir, New Relic, and AppDynamics, IT cloud infrastructure plays Box and MongoDB, and Chinese e-commerce giant Alibaba, which appears poised to break FB’s record for the largest IPO valuation in history. While prospectives and pricing will ultimately determine the attractiveness of each issue, we see the SaaS names as the most promising but are skeptical that many of the consumer and infrastructure companies can cope with looming rivalry from scale players.
  • No evidence of a bubble. Many have suggested that the high multiples being paid for high growth TMT stocks, IPOs and acquisitions constitute a bubble, analogous to the frothy internet bull market of 1999-2000. We believe that the comparisons are cosmetic at best. At its heart, the 2000 bubble was driven by capital investment that was largely unsupported by cash flows. When telecom carriers could no longer secure financing for speculative network build-outs, equipment deals were canceled and dot com dreams of ubiquitous broadband were dashed. Combined with the end of enterprise spending on Year 2000 upgrades, growth and profitability assumptions across TMT proved wildly optimistic. This time, the growth expectations are fueled by paradigm shifts in advertising campaigns, consumer retail spending, enterprise IT budgets, and infotainment habits – these are enormous global addressable markets, with plenty of runway left. Capital investment in pursuit of these opportunities is fueled by prodigious cash flows, with most balance sheets blissfully unlevered. Valuations are also reasonable, particularly compared with the 2000 peak and in light of the visibility into future growth and the strength of the sectors cash position. While there are certainly individual issues where hype exceed reality, we do not see evidence of comprehensive overvaluation.
  • Adding FB and recent IPO DATA to the large cap model portfolio. Our large cap model portfolio performance slid during the past month, with returns since our last update in December off 3200bp vs. the tech components of the S&P. The biggest culprits were TWTR and AMZN, both of which traded off sharply on poorly received 4Q results that we believe will prove anomalous. We are removing CRM, which we fear will face new competition fueled by plummeting cloud hosting prices, and CTXS, which does not seem to getting the traction that we had hoped in device virtualization and which faces aggressive consensus expectations. In their place, we are adding FB, of which we recently wrote a detailed report (, and DATA, which rides the SaaS/IaaS wave described in our recent piece (
  • Adding new IPOs OPWR and GRUB to the small cap model portfolio. The small cap portfolio outgrew the tech components of the S&P600 by 4600bp, led by GTAT, which more than doubled on news that it would supply sapphire crystal display technology to AAPL for its anticipated iPhone6. We are inclined to sell on the hype, and are removing it from the portfolio, along with type font licensor TYPE. We are adding two IPOs from a week ago, OPWR, which offers SaaS software to the electric utility industry, and GRUB, which has clear leadership handling on-line restaurant delivery orders after merging with its main rival, Seamless, several months ago. We note that the pace and quality of new IPOs will make the TMT small cap space far more interesting than it has been over the past few years.

In the Spring, An Investor’s Fancy Lightly Turns to IPOs

Between the financial industry melt down of 2008 and the butterfingered launch of FB in 2012, would-be TMT IPOs stacked up like 737’s over O’Hare during a polar vortex. CB Insights counted 472 venture funded companies in the pipeline at the start of 2013, and, despite 46 TMT IPOs during the year (56 if counting recapitalizations and spinouts like Sprint or T-Mobile) – the most since 2007 – that figure had ballooned to 590 by January of this year. Of these, 17 had established billion dollar plus valuations based on funding, not including Alibaba, which is not venture backed, nor WhatsApp and Oculus VR, which were snapped up by FB for a cool $21B before any need for further capital had emerged.

Successful deals last year – TWTR, FEYE, FUEL, DATA and MKTO, to name a few – have broadened the receptivity of the market for new issues. As a result, i-banks are filling their calendars to the brim and road shows are crowding buy-side conference rooms. The class of ‘13 performed well – the average new issue appreciated more than 34% during the first 6 months trading, including an average 28% pop on the first day. The mix skewed to the enterprise, with just 14 consumer deals (including several old-line firms like S, TMUS, LMCA, NWSA, MEG and AMC). More than half of the remaining IPOs were enterprise software companies, largely following the SaaS model.

YTD, the slate has shifted back to the consumer, with 6 of 15 issues addressing the mass market. With Alibaba expected to break FB’s record for the largest IPO ever, and with the possibility of well known consumer internet app franchises Dropbox, Evernote, LendingClub, Snapchat, Pinterest and AirBnB also coming to market, this shift is likely to continue, although there is also an impressive list of enterprise oriented names on the roster. Exempting Alibaba, which already dominates e-commerce in China, we are skeptical that most of the consumer-oriented potential IPOs will sustain long term success in a mobile market dominated by GOOG and AAPL – promising 3rd party apps are continually swallowed by functional integration into Android and iOS. To succeed, we believe non-platform plays have to establish critical mass, a la AMZN and FB, or sustainable differentiation with firm competitive barriers, like OPEN and TWTR.

We are more intrigued by SaaS plays, both industry vertical solutions like Palantir and Opower, and horizontal applications like New Relic, AppDynamics, Pivotal Labs, SugarCRM, and DocuSign. We have longer term concerns for companies in the “hybrid cloud” space, like Cloudera or MongoDB, as we believe that the substantial cost and performance advantages of the biggest public cloud players will eventually squeeze their markets.

We are adjusting both our large cap and small cap portfolios, taking advantage of recent IPOs in both cases. We are adding FB, which we believe will benefit greatly from a paradigmatic shift in advertising, and Tableau, which provides data analytic tools on a SaaS basis, replacing CRM and CTXS. In the small cap portfolio, we are adding OPWR and GRUB, both of which priced this past week. OPWR has a strong SaaS to help electric utilities manage power consumption.

Exh 1: IPO Activity in US Tech, 2003-2013

Exh 2: Tech IPO Pipeline, 2014 versus 2013

IPOs, You are Cleared For Landing

After years of recovery from the 2008 financial industry meltdown, and the frustrating aftermath of Facebook’s awkward 2012 IPO, 2013 was a tremendous relief for the tech bankers. 46 TMT IPOs launched, the largest slate since 2007, including big ticket issues like Twitter and FireEye (Exhibit 1). Still, 5 years of a new issue draught leaves a growing backlog of private TMT companies angling for IPO or acquisition. At the start of 2013, 472 venture backed companies were in the pipeline. Even after those 54 new issues and an active M&A market in 2013, the beginning of this year saw a record 590 companies looking to monetize their investors (Exhibit 2). 17 of these had already established billion dollar valuations through earlier financing rounds, with a few other billion plus valuations lurking amongst non-venture backed firms like Alibaba and Cloudera, and already profitable companies that have not recently required additional capital.

Only a couple of weeks into 2Q14, 15 TMT IPOs had already launched vs. just 6 over the same period a year ago, with another 79 open S-1’s filings (vs. 61 a year ago), setting a pace that will certainly blow past 2013 for both the volume and value of IPOs (Exhibit 3). Amongst the 15 deals, 5 currently trade with market caps in excess of $1 Billion, led by consumer internet names King Entertainment ($5.8B), GrubHub ($2.6B) and ($1.5). Add in the old-school advertising spin out CBS Outdoor Americas ($3.5B), and this year’s IPOs have a distinctly consumer bent, with over half the issues and most of the value coming from that side. Contrast that with 2013, when 32 of 54 launches were for enterprise-focused businesses and when half of the 16 consumer oriented IPOs were for old-school media and telecommunications companies, such as Sprint, T-Mobile USA, Liberty Media, News Corp Publishing, Media General and AMC Entertainment. Big name social media platform Twitter may have been the big name of the 2013 IPO year, but it was an anomaly. Most of the best performing IPOs were enterprise software players, including Tableau Software, Marketo, FireEye, RocketFuel, BenefitFocus, Barracuda Networks and Cvent.

Exh 3: Outstanding S-1s that have not gone public, 2014 LTM versus Prior Year

Exh 4: 2013 Tech IPOs by Latest Market Cap

Exh 4: 2013 Tech IPOs (Continued)

Open Sesame

Alibaba, the Amazon of Chinese e-commerce, appears certain to IPO this spring and, according to some, could price at a market valuation in excess of $100B. This would make it the highest valued IPO in history, surpassing Facebook’s 2012 $70B debut. While a well-established pillar of the Chinese internet, growing rapidly and apparently profitable, Alibaba is not without risks. Dependence on the increasingly shaky Chinese economy, aggressive competition, and the potential for interference by the government loom over a company that has been aggressive in acquiring its way into new business areas like streaming media. Nonetheless, the enthusiasm for the IPO is palpable, with shares in Yahoo, which owns a 21% stake in the company, up more than 50% YoY. We are not in position to fairly evaluate Alibaba, the Chinese e-tail market, or its idiosyncratic risks, but the tea leaves seem to point to a warm reception amongst investors.

Exh 5: Outstanding S-1s filed 2014 LTM

While the list of open S1s does skew toward the enterprise, including well-known names like Arista, Box and ZenDesk, there are many consumer oriented names lurking (Exhibit 5). Dropbox, AirBnB, Evernote, Eventbrite, Gilt Group, Uber, Square, Lending Club, Snap Chat and Pinterest are all potential players if a strong TMT IPO market can be sustained, and all would likely command billion dollar plus valuations as public companies. The enterprise-oriented list does not feature as many recognizable names as the consumer, but there are many intriguing companies and the likelihood that they follow through with their IPOs in 2014 is considered higher. Box, MongoDB, Pivotal Labs, Cloudera, New Relic, AppDynamics, SugarCRM and DocuSign are considered more likely than not to launch this year, also all likely to be valued north of $1 billion. If the recent tech sell off doesn’t scare off the contenders, investors will have an exciting slate of deals to parse through between now and the end of the year.

The Voyages of the Starship Enterprise

Recent tech IPOs have performed well. Considering just US companies and filtering out mature businesses (Sprint, T-Mobile USA, Liberty Media, etc.), 46 2013 IPOs have returned more than 33% since their offerings, while 25 2012 IPOs are up more than 104% on average from launch. Even with the recently tough tech tape, 2014 IPOs are still up more than 6.4% from their offering prices on average.

Exh 6: Ave TMT IPO returns to date by year of issue

For 2013, Consumer issues were the clear winners, with 14 IPOs up an average of 34% since their offerings. In contrast, 32 enterprise IT issues have returned almost 30% since launch, while 3 ad tech/media plays are up about 20%. Indeed, SaaS software was a key theme amongst 2013 IPOs, with 10 total IPOs for the year and average returns of more than 76%. SaaS software vendors Tableau and Marketo were both up more than 100% apiece. Despite its recent weakness, Twitter has been a winner for its IPO investors, up more than 60% since its offering.

So far this year, the initial returns for IPOs have been greater for enterprise companies, which carrying only a 9.1%% to 1.9% advantage vs. consumer internet players (Exhibit 6). Electric utility SaaS provider Opower is up a healthy 13% in its first week of trading, while strong performance by GrubHub (+35%) and (+27%) have offset weak launches by King Entertainment (-22%) and (-31%) (Exhibit 7).

Exh 7: 2014 YTD Tech IPOs by Latest Market Cap

The Boy Who Cried Bubble

The strong performance of these newly minted stocks, and in particular, those tied to the loosely defined concept of the “cloud”, has many investors skeptical. Add in Facebook’s $19B deal for the private WhatsApp, its 50 employees, and its less than $50M in revenues, and the most vocal of these investors are calling it a bubble. We disagree.

The last internet bubble, the one that burst in 2000, was distinctive. At its heart was a manifest destiny land grab, as dozens of companies raced to build out high capacity fiber networks – CLECs building fiber rings in cities and suburbs, alternative long haul operators laying fiber on railroad rights of way, and international carriers running it under the ocean. All of these networks would be equipped with the latest optical transmission gear from Nortel, Lucent and Ciena, and routers from Cisco and Juniper. All of these stocks and many more ran up on gold rush revenue expectations, as the carriers began double ordering to make sure they could get the gear that they were sure that they needed, and their equipment partners shouted their enthusiastic guidance to enthralled investors. Meanwhile, a raft of internet based businesses were bid up indiscriminately – rose alongside – based on the idea that they would use all of this impending bandwidth to wash over the brick-and-mortar economy like a tsunami.

It didn’t work out that way. The carriers were burning cash and piling up debt to finance their pell mell build out. The debt market began to dry up, and without the ability to raise new funding, the carriers were forced to slam on the brakes. Equipment makers were caught unaware, and began to receive a torrent of order cancelations, which cascaded down the value chain. Quarters were badly missed and guidance was harsh medicine. The dot coms riding on top were hit hard, and only the best survived.

Exh 8: TMT addressable markets

The story is very different this time. First, there is no toxic leverage lying in wait to scuttle business plans – the infrastructure of the cloud is well-funded by existing cash flows – if anything, the industry is guilty of hoarding cash. Second, the revenue streams are substantial, well established and growing fast. The telecom carriers of the dot com era were building on spec – their business opportunity was presumed but not established. The robust equipment market was illusory, based on orders for which customers couldn’t pay. The dot coms were simply too early. In contrast, internet advertising is on the receiving end of a dramatic paradigm shift in the nearly trillion dollar global ad market, with the dramatic and profitable growth of companies like Google and Facebook ample proof of the concept (Exhibit 8). Enterprise cloud hosting and software as a service threaten the entire $800M IT industry, with shifting spending evident over five years of data center budgets. E-commerce is a growing force in the $13T global retail market – Amazon continues to post 20%+ top line growth despite its size, and is turning its attentions to new markets after having laid waste to book stores and raising a mortal threat to retail chains of every ilk. There are already more than a billion smartphone users in the world, as wireless data uses continues its torrid expansion, and 350M people own tablets. All of this points to a massive addressable market in the early days of shifting toward cloud-driven paradigms, creating extraordinary opportunities for growth.

Which brings us to the third point – the best players (Google, Amazon, Facebook, etc.) have already achieved critical mass and are still able to grow many times faster than the global economy. The companies in queue to IPO are much, much smaller (with the exception of Alibaba) and thus, even better able to sustain rapid growth, assuming that they are well positioned against the opportunities that have been created. Finally, as a point of comparison, at the height of the dot com bubble in 2000, the P/E of the S&P 500 was nearly 40, while today it is 16, just a couple of ticks above the long term average of 14. Certainly, the hottest tech stocks trade a significant premium, but any comparisons to the market at the turn of the millennium seem hyperbolic.

Value is in the Eye of the Beholder

The recent IPOs do trade at seemingly astronomical multiples of trailing sales and earnings, if they have earnings at all. However, this, in and of itself, is no proof of overvaluation. Indeed, for well positioned companies at an early stage, addressing a huge potential opportunity, already delivering triple digit annual growth with reasonable expectations of attractive sustainable margins in the future, astronomical multiples often prove to be more than justified.

But there is the rub. For fast growth companies with commensurately high multiples, 80% or more of the value is in the terminal assumptions of those 5-year discounted free cash flow models. A small tick up or down in the growth rate or margins can send the fair value calculations swinging wildly, and until we get much closer to 2019, the evidence on which those assumptions is based is scant at best. Thus, as long as a company can post near term numbers that do not belie a long term, prosperous future, the dream can remain alive. The haters may hate, but the stocks will still go up. We wrote about this phenomenon at length in our recent deep dive on Facebook (, concluding that as long as the company can easily beat consensus, and we believe that it can over the next 6-8 quarters, its valuation (which we believe is attractive) is essentially irrelevant (Exhibit 9). Many of the recent and coming IPOs are likely to have similar profiles.

Exh 9: Facebook Valuation Sensitivity Analysis, Beta versus Terminal Growth Rate

Dancing with Giants

While we see enormous opportunities for cloud-based businesses to benefit from the sea change paradigm shifts that we see in advertising, retail, infotainment, and enterprise IT, there are some critical positions that have already been staked out by excellent competitors with substantial scale, skill and experience advantages. On the consumer side, cloud-based businesses must reach their customers through platforms owned and controlled by Google, Apple and, to a lesser extent, Microsoft. While the three OS players have vested interest in maintaining a vibrant ecosystem with opportunity for 3rd parties to prosper, these parties are required to remit 30% of their revenues as an entry fee to each of the three popular mobile platforms. Moreover, Google, Apple and Microsoft are also constantly adding new functionality integrated into each new release, targeting the same value-added functions addressed by 3rd party app vendors. It is very difficult for an independent app to succeed against an integrated default app provided by the platform owner, and only those with clearly differentiated functionality and an existing critical mass of users can hope to win. Amongst the recent IPOs, we believe Facebook, Twitter, and GrubHub stand out in this way. Sifting through the names in the pipeline, Uber, AirBnB, Lending Club, and Square appear to be differentiated and well positioned against their particular opportunities (See Appendix for business descriptions of IPOs).

On the enterprise side, the story is similar. Amazon, Google and Microsoft, with their massive distributed cloud data center infrastructures, have dramatic cost and performance advantage vs. both private enterprise data centers and smaller, would-be cloud rivals. The opportunities for companies that seek to extend the usefulness of subscale data processing operations or that look to compete with the big three cloud hosts may be fleeting at best. At the same time, the ongoing rivalry amongst Amazon Web Services, Google Compute Engine and Microsoft Azure has hosting prices plummeting and services growing ever more customer friendly. This dynamic is dramatically reducing the barriers to entry for SaaS application companies, opening the door for relative newbies, like many of the recent and projected IPOs, to compete to displace traditional enterprise applications.

Here, the list of attractive players is longer. Amongst recent IPOs, we see Opower, Barracuda Networks, RingCentral, FireEye, BenefitFocus, Cvent, Tableau, Marketo, Workday, ServiceNow, Splunk and Guidewire as well-positioned to exploit opportunities for SaaS applications. Amongst the companies in the pipeline, we are particularly interested in Pivotal Labs, New Relic, AppDynamics, SugarCRM and DocuSign.

The Large Cap Model Portfolio – Caught in a Landslide

Recent weeks have not been kind to our large cap model portfolio, which is focused on the companies that we believe will be the leaders in the emerging new TMT paradigms. Since the previous update in December, we have lost more than 4.5% relative to the tech components of the S&P500, with half of that underperformance occurring just in the past two weeks. Twitter and Amazon have been the biggest losers in the portfolio, after Twitter disappointed with its 4Q subscriber numbers and Amazon missed on its top line. We expect both companies to broadly surprise to the upside this quarter and next, and in both cases, believe that their relative sell offs are significantly overdone (Exhibit 10).

Exh 10: SSR Large Cap TMT Model Portfolio Before Reconstitution

We are making adjustments to our portfolio. We are removing Citrix, which was a poor performer this period, and, which was a strong performer. In the case of Citrix, we have been disappointed with the pace of adoption for mobile device virtualization and have grown more concerned for the health of the company’s desktop virtualization franchise. For, we believe expectations fully reflect the near term opportunities, and that the longer term is likely to bring rivalry from new entrants exploiting the falling cost of web hosting.

In their place, we are adding Facebook and Tableau Software (Exhibit 11). We recently wrote a research piece which details our bullish stance on Facebook ( To summarize, we believe that there has been a substantial shift in the advertising market toward on-line mobile, social and video ads, creating a considerable tailwind for Facebook against very conservative consensus targets. With Tableau, we see a company delivering near triple digit sales growth with strong underlying profitability as a leading SaaS player in the already high growth business analytics market.

Exh 11: SSR Large Cap TMT Model Portfolio – Reconstituted

The Small Cap Portfolio – Cashing in a Sapphire Chip

Our small cap model portfolio outperformed the tech components of the S&P600 by 4.8 percentage points, up 6.6% in absolute returns. The big driver was GT Advanced Technologies, which enjoyed a 90% pop on being named as a prime supplier to an Apple sapphire display plant built in Arizona and rumored to support the upcoming iPhone6 (Exhibit 12). Given some skepticism as to the global reception for the next iPhone, we are inclined to take our profits now, and thus, are removing it from the portfolio. We are also removing electronic font publisher Monotype Imaging Holdings. Growth its segment appears to be slowing, as the performance of the stock has stagnated. Our biggest loser for the period was 3D printer maker The ExOne Company, down 52%. While we are beginning to believe that the hype around widespread 3D printing adoption has been overdone, we will keep XONE for the time being (Exhibit 13).

We are adding recent IPOs Opower and GrubHub. Opower is delivering 63% topline growth supplying a SaaS application to electric utilities to do detailed analysis of household power usage and identify opportunities for conservation. We believe that Opower is well positioned in this substantial and growing market. GrubHub came to market shortly after completing a merger with Seamless, its biggest rival in the online restaurant delivery market. We believe that the company has first mover advantage, critical mass and functional barriers to entry in this business. We expect GrubHub to be successful in its own right, but also see significant synergies with other delivery and restaurant focused franchises – e.g. Amazon, Google, Open Table, etc.

Exh 12: SSR Small Cap TMT Model Portfolio – Before Reconstitution

Exh 13: SSR Small Cap TMT Model Portfolio – New Constituents

Appendix – Potential IPO Company Descriptions

AirBnB was founded in 2008 as and is a service to provide a platform for individuals to rent unoccupied living spaces for short periods of times to guests. Properties include room shares, apartments, homes, and more exotic properties such as villas and even private islands. Property owners or “hosts” list their spaces on the site for free. Costs of the service are absorbed by “guests” who use the company’s proprietary messaging system to book arrangements with the “hosts.” Once booking is made, AirBnB makes a payout to “hosts.” The platform has allowed “hosts” to develop track records with “users” who rank and review available properties. The company reached 1M bookings in 2011 and is currently expanding internationally. AirBnb was initially backed by Y-Combinator and raised its initial rounds with Greylock Partnes and Sequoia Capital.

AirWatch is a provider of mobile device management (MDM) software and standalone systems for content, apps, and email. In July 2013, the company acquired Motorola Solutions MSP (Mobility Services Platform) and extended management capabilities to ruggedized devices. The company received its first round of VC funding from Insight Venture Partners and Accel raising $200M. The company announced it would be acquired by VMWare in January 2014. The deal is still pending.

AppDynamics is an application performance management company focusing on managing the performance and availability of applications across cloud computing environments as well as inside the data center. It specializes in complex distributed environments and currently supports Java, .NET, and PHP applications offering both SaaS and on-premises deployments. The company received four rounds of funding totaling $86.5 million and is valued around $500M in its latest round.

AppNexus was founded in 2009 by former digital executives at Right Media and Google’s DoubleClick. The company specializes in real-time online advertising and offers an auction infrastructure for bidding. The platform is integrated with several advertisers including Google and Microsoft and offers the ability to buy inventory across formats including desktop and mobile. The company is one of the only independent advertising tech pureplays that facilitates real time auctions. The company now delivers some 40B ads per day. The company recently raised $75M in January 2013.

Automattic is a web development corporation founded in August 2005. The company is most notable for its software that facilitates blogs and web site creation, and gave trademark and control to the WordPress foundation in 2010, but still offers a wide range of wed development apps. The company raised $30.6M in Series A and B financing and subsequently early equity holders were bought out by Tiger in two round worth $125M .

The company was started as a college business project in 2005, focusing on content and access for enterprise users. It is essentially a file-sharing network that saves and stores information uploaded by a customer to the company’s website. Box initially received capital from angel investor Mark Cuban and then went through several rounds raising an aggregate of $284M with an additional undisclosed amount from Intel late in 2012. The company has grown to count some 15M individual and over 125,000 business as customers.

Cloudera provides Apache-Hadoop based software and services for data-driven enterprises. The company was founded in late 2008 by leading big data experts from Facebook, Google, Oracle, and Yahoo and was called the quintessential Silicon Valley story by the New York Times. Additionally, the company’s early angel investors come from the current and former CEOs of VMWare, MySQL, and LinkedIn. The company raised $65M in December for total financing to date of $140M and now carries a valuation of about $700M.

Deem is a cloud e-commerce company offering syndication of its services across its own network of buyers and sellers. The company also provides expense management solutions for corporate. The company has raised some $442M in funding and is notably backed by American Express.

Docusign offers a cloud based electronic signature platform. Accessible from any Internet-connected device, DocuSign supports virtually any document and form type in simple and complex workflows, and provides broad user authentication options, data collection, secure document/data storage and retrieval, as well as real-time negotiation and collaboration tools. Founded in 2003, the company has so far raised $202M in funding.

Dropbox is a file hosting service that was founded in 2007 by two MIT grads with seed funding from Y Combinator. The company offers cloud storage and file synchronization across devices. Founder Drew Houston conceived of the service after repeatedly forgetting his USB flash drive. The company offers a freemium business model with set storage limits, while paying users can get more capacity. Houston and co-founder Arash Ferdowsi were famously invited to a meeting with Steve Jobs in December 2009 who offered to buy the company and called the company’s service “a feature, not a product.” They turned down the Apple offer and managed to raise over $250M in 2011 valuing the company at $4B. The company has since logged over 100M users and even made an acquisition taking out photo storing giant Snapjoy.

Evernote launched in 2008 offering a suite of software and services for notetaking and archiving. The company offers it service via a feemium model. Basic capabilities are free and ad-supported, while more premium services are offered via subscription. The company allows users to store notes on all media: files, webpages, handwritten notes, photos, voice, etc and allows them to be sorted, annotated, edited and stored in the cloud, though some versions of the software allow for local storage. The service now has some 50M users, with at least 1.4M paying for premium services. The company has raised over $250M with its largest financing rounds last year bringing in $155M.

Eventbrite was founded in 2006 and allows its users to set up and promote ticket sales for events of any size. The company generates revenue by charging a ticketing fee that can be borne either by the ticket purchaser or by the promoter. Fees are typically $0.99 per ticket plus 2.5% of ticket price. Free events can be ticketed for no fee. Eventbrite sold over $600M in tickets in 2012. The company has some additional products including a card processing app, which allows users to process will-call and same day ticket sales. A fairly conservative estimate of 2012 revenue would be in the range of $30M. The company has so far raised about $80M from investors that include Sequoia Capital and Tiger Global.

Gilt Groupe
Gilt Groupe was founded by a serial entrepreneur that saw a market opportunity for flash sales. In order to gain street cred among the New York fashion elite, founder Kevin Ryan brought on two fashion savvy HBS grads with eCommerce and Luxury Goods experience. The result was a partnership with Vogue and editor Anna Wintour’s blessing. Since being founded in 2007, the company’s sales are now said to be in excess of $1B annually with customers concentrated on the coasts and in urban areas.

Lending Club is a peer to peer lending company and the first such lender to be registered with the SEC to offer loan trading on the secondary market. Lending Club operates an online lending platform that enables borrowers to obtain a loan, and investors to purchase notes backed by payments made on loans. As of November 2013, Lending Club has originated over 3 billion USD in loans, and averages $7.8 million in daily loan originations. As of December 2013, it returned nearly $300M in interest payments to investors. The company raised $220M.

New Relic offers SaaS Software Analytics Platform that offers Application Performance Management and Real User Monitoring for Cloud and Data Center deployed web applications implemented in Ruby, Java, .NET, Python, PHP, Node.js. New Relic also offers mobile monitoring solutions for iOS and Android applications. Founded in 2008, the company has raised $175M in funding and has 388 employees.

Palantir is a cybersecurity software firm founded in 2004 by several PayPal alums and Stanford computer scientists. The concept grew out of technology developed to detect fraud at PayPal. Early investments came from the CIA’s venture arm In-Q-Tel and from The Founders Fund. Palantir’s software allows human analysts to quickly explore available data through intelligence augmentation. The software has a wide range of applications from fighting fraud to prosecuting crimes to fighting terrorism. The company has so far raised over $301M in funding and carries a $4B valuation on $350M in revenue.

Pinterest is a photosharing site with a pinboard-like skeumorphic interface. The site was conceived in December 2009 and launched as a beta in March 2010.It’s founders initially wanted to pitch the site to a publishing company, but were dismissed before even getting a meeting. The site was off to a slow start only reaching 10,000 users in its first nine months, but quickly went viral thereafter reaching 10M users by February 2012. According to ComScore, it became the fastest independent site to reach 10M monthly unique visitors in the US. Like Twitter, Pinterest has had nearly zero revenue in its growth years and is now actively exploring monetization via advertising and usage tracking tools. The company most recently raised $200M in a February Series D round from Valiant Capital Partners, Andreessen Horowitz, and Bessemer Venture Partners. The latest funding round values the company at $2.5B.

Pivotal is an enterprise Platform as a Service. The company’s mission is to enable customers to build a new class of applications, leveraging big and fast data, doing all of this with the power of cloud independence. The company uses technology people and programs from EMC and VMWare. It was founded in 2013 and has $105M in funding, mostly through the private equity arm of GE.

Pure Storage uses flash memory to accelerate random I/O-intensive applications like server virtualization, desktop virtualization (VDI), database (OLTP, rich analytics/OLAP, SQL, NoSQL) and cloud computing. Launching later this year, the company’s products are in private beta with select customers. Pure Storage is funded by Greylock Partners and Sutter Hill Ventures. It was founded in 2009 and has $250M in funding to date.

Snapchat is a social messaging /photo app where content can only be viewed for a limited time after opening before being erased. The Product has as strong following with younger demos and famously rejected a $3B takeout offer from Facebook. The company was founded in 2011 and has $123M in funding to date.
Square is an point of sale electronic payments service conceived by Twitter founder Jack Dorsey and his friend Jim McKelvey in 2009. McKelvey was frustrated by his inability to complete a transaction with credit cards for some items he tried to sell. The company launched with a reader device that plugs into the audio jacks of select mobile devices to support an app that allows for cards to be swiped. The company currently provides the readers free for users and charges 2.75% per swipe, which is higher than traditional card transactions. It also allows for manually entered transactions at 3.5% plus $0.15. The company’s tool and app has become ubiquitous among small businesses and has allowed the company to raise over $340M in financing on a $3.25B valuation.

SugarCRM was founded in 2004 and was one of the first companies to provide open source marketing software. With an initial $2M investment, the company expanded quickly and gained 25,000 users in its first year. It raised $46M in venture funding shortly thereafter. SugarCRM is notable in that its founders left the company by 2009 and the company became cash flow positive for the first time in 2011. The company now offers a suite of CRM software.

Survey Monkey
Survey Monkey was founded in 1999 and has grown to be the world’s largest survey company and now helps its users collect over 1.5M survey entries each day. Customers include 99% of the Fortune 500, small business, academia, and other users. Like other companies profiled here, Survey Monkey also offers a freemium service with over 14 million free users, 360,000 paid customers and 65 million monthly visitors to its website. The company has raised some $450M in Equity financing and recently raised $350M in debt from JP Morgan in an $800M recapitalization that valued the company at $1.35B in March 2013.

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