Hope everyone is decompressing from what looked like a big weekend at Bitcoin 2021 and the hugging exhibition between Mayweather and Paul. Back on the home front, KKR and CD&R announced their intention to acquire OSS stalwart Cloudera who is out in a deal valued at $5.3 billion (a 24% premium to where the stock closed ahead of the announcement). The acquisition marks the end of a tumultuous run as a public company with the stock trading below its IPO ($15 / share) amidst struggles to adapt to an environment that has seen large shifts to the public cloud. However, the data point still represents a significant outcome (half a decacorn) for the open-source space as the universe of buyers (non-strategics) continues to look for companies that can generate strong top-line ($869mm in revenue) and bottom-line performance (+17% operating margin).
In other major open source news, Confluent is in as they filed to go public after building a commercial platform around the Apache Kafka product which allows enterprises to stream data for real-time analysis. Kafka is deployed at 80% of the Fortune 100 and the Company believes their current addressable market is $50 billion (which includes application infrastructure, database management, analytics, business intelligence, data integration and data quality tools). Confluent’s LTM revenue was $263mm with -90% operating margins.
In contrasting these two deals, the value of growth in today’s market is clear. Although Confluent’s public market valuation is unknown, the Company’s last private round was raised at $4.5bn and the expectation is that it will price as high as $10bn in the public markets. Despite Cloudera having over 3x as much revenue and positive operating margins, Confluent is set to be valued as much as two times higher as investors continue to disproportionately value revenue growth above every other metric (Confluent has 53% revenue growth vs Cloudera who has 9% revenue growth).
Click the pink button!
Correction: In our May 24 newsletter, we erroneously stated that DataStax had acquired Kesque and K8ssandra. K8ssandra is a DataStax solution and didn’t come through an acquisition.
Private Markets
Tenstorrent, a hardware startup led by Jim Keller is developing next-generation graph-based AI computers based on the RISC-V open source processor specification, announced their $200M Series C led by Fidelity.
Uptycs, a company commercializing osquery, announced their $50M Series C led by Norwest.
SignalWire, a cloud communications product company and also the creators of FreeSWITCH, announced their $30M Series B led by Prosperity7 (a venture arm of Saudi Aramco).
Airbyte, a company re-inventing data integration pipelines, announced their $26M Series A led by Benchmark.
Orbit, the company delivering developer and community driven companies a new kind of system of record (CRM ++), announced their $15M Series A led by Coatue.
Stemma, builders of data catalog tools, powered by Lyft's Amundsen, announced their $4.8M seed round led by Sequoia.
Golioth, a company building commercial support and product around the Zephyr RTOS IoT project, announced their $2.5M seed round led by Zetta.
Public Markets
To track the performance of COSS companies, we’ve created an equal-weighted index comprised of public names including: MongoDB, Elastic, Talend (acq. by Thoma Bravo announced), Cloudera (acq. by KKR/CD&R announced), Rapid7, Fastly and Jfrog.
The COSS Index continues to underperform the broader markets after a quick start to the year.
COSS Index -17%
NASDAQ +7%
S&P 500 +13%
The two-week rally raised the rolling three-year performance above the S&P and within striking distance of the NASDAQ:
COSS Index +64%
NASDAQ +80%
S&P 500 +53%
COSS companies traded up over the last two weeks and narrowly beat their Emerging Cloud peers bucking a trend we had seen for the previous ten weeks. All three indices continue to trade significantly higher than their rolling five-year average. Also of note, the 3x Cloud Premium appears in tact with the Emerging Cloud Index trading roughly three times higher than the NASDAQ (current and over the past five years)
COSS Index: Current Multiple 12.8x | Five-Year Mean: 7.8x
Emerging Cloud Index: Current Multiple 12.5x | Five-Year Mean: 9.2x
NASDAQ Composite: Current Multiple 4.1x | Five-Year Mean: 3.1x
