We took a summer cycle off this past month, but the OSS market did not! $684mm was announced in funding for private OSS companies in the past month, including 4 $100mm+ rounds. Despite the exuberance in the private markets, the public markets took a mini-breather over concerns of a resurgent virus and inflation risks. On the back of this trend, the COSS index has looked for direction over the last month trading flat-to-down and continuing to lag the major indices.
This week, we took a look at two unrelated open source businesses that both filed to go public over the last month: Kaltura ($1.4bn) and Couchbase ($1.0bn). We’ll be adding these names to our COSS index when they list, but wanted to take a closer look at their historical financials and how they compare.
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Private Markets
dbt Labs, previously known as Fishtown Analytics and makers of the dbt analytics engineer workflow, announced their $150M Series C led by Altimeter.
Sourcegraph, bringing great code search to every developer, announced their $125M Series D round led by a16z.
Pantheon, makers of a leading WebOps platform (starting with Drupal and WordPress hosting years ago), announced their $100M Series E round solely funded from the Softbank Vision Fund.
Vercel, creators of next.js and many other extraordinary open source DevTools to develop, preview and ship applications on the web, announced their $102M Series C led by Bedrock.
SANITY, a modern CMS that allows users to collaborate in real-time on structured content, announced their $39M Series B led by ICONIQ.
PlanetScale, the Vitess company, announced their $30M Series B led by Insight.
r2c, building world-class security tools that feel simple to developers, announced their $27M Series B round led by Felicis Ventures.
Robocorp, creators open source RPA framework tooling and products, announced their $21M Series A led by Canvas.
Graylog, an open source log management platform, announced their $18M growth equity led by Harbert.
env0, a new Terraform company building automated remote-run workflow tooling, announced $17M Series A led by Microsoft's venture arm: M12.
Viam Robotics, founded by Eliot Horowitz (former MongoDB co-founder/CTO), is building open-source hardware, software, and services for the future of robotics, announced their $12M Seed round led by Fred Wilson at USV.
Checkly, building a reliability automation platform for developers, announced their $10M Series A led by CRV.
Opaque, building a solution for secure analytics on sensitive data in the cloud (even when multiple organizations are involved), announced their $9.5M Seed round led by Intel Capital.
Acryl Data, a startup commercializing the DataHub project created at Linkedin, announced their $9M Seed round led by 8VC.
Mapped, building a universal API for connecting control systems across elevators, HVAC, and other physical assets (a "digital twin of data infrastructure"), announced their $6.5M Seed extension led by MetaProp and Allegion Ventures.
Meltano, a GitLab spin-out building a platform for ELT pipelines, announced their $4.2M Seed round led by GV.
AtomicJar, creators of the popular Testcontainers integration testing project, announced their $4M Seed round led by Boldstart.
Public Markets
To track the performance of COSS companies, we’ve created an equal-weighted index comprised of public names including: Confluent (new!), 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 and has trended downward over the past month, retracing losses from earlier in the year.
COSS Index -13%
NASDAQ +11%
S&P 500 +13%
The last four weeks pushed the rolling three-year performance of the COSS Index below the NASDAQ but above the S&P.
COSS Index +80%
NASDAQ +82%
S&P 500 +52%
COSS companies traded up marginally over the last four weeks continuing their winning streak over their Emerging Cloud peers. All three indices continue to trade significantly higher than their rolling five-year average.
COSS Index: Current Multiple 15.4x | Five-Year Mean: 8.1x
Emerging Cloud Index: Current Multiple 14.3x | Five-Year Mean: 9.4x
NASDAQ Composite: Current Multiple 4.3x | Five-Year Mean: 3.2x
Kaltura & Couchbase
Kaltura ($1.4bn) and Couchbase ($1.0bn) recently filed to go public and we took a look at how these unrelated businesses are tracking against each other. Of note, we used Couchbase’s year-end financials to help compare more effectively.
As background, Kaltura has built an open-source cloud video software solution:
Our mission is to power any video experience, for any organization. Our Video Experience Cloud offers live, real-time, and on-demand video products including Video Portal, Town Halls, Video Messaging, Webinars, Virtual Events and Meetings. We also offer specialized industry solutions, including LMS Video (Learning Management System), Lecture Capture and Virtual Classroom for educational institutions, as well as a TV Solution for media and telecom companies. Underlying our products and solutions is a broad set of live, real-time, and on-demand Media Services consisting of Application Programming Interfaces (“APIs”), Software Development Kits (“SDKs”), and Experience Components, as well as our Video and TV Content Management Systems. Our Media Services are also used by other cloud platforms and companies to power video experiences and workflows for their own products. Our Video Experience Cloud is used by leading brands across all industries, reaching millions of users, at home, at school and at work, for communication, collaboration, training, marketing, sales, customer care, teaching, learning, and entertainment experiences. With our flexible offerings, customers can experience the benefits of video across a wide range of use cases, while customizing their deployments to meet their individual, dynamic needs.
In contrast, Couchbase has built an open-source modern database for enterprise applications:
Our mission is to empower enterprises to build, manage and operate modern mission-critical applications at the highest scale and performance. Couchbase provides a leading modern database for enterprise applications. Enterprises rely on Couchbase to power the core applications their businesses depend on, for which there is no tolerance for disruption or downtime. Our database is versatile and works in multiple configurations, from cloud to multi- or hybrid-cloud to on-premise environments to the edge, and can be run by the customer or managed by us. We have architected our database on the next-generation flexibility of NoSQL, embodying a “not only SQL” approach. We combine the schema flexibility unavailable with legacy databases with the power and familiarity of the SQL query language, the lingua franca of database programming, into a single, unified platform. Our cloud-native platform provides a powerful modern database that serves the needs of both enterprise architects and application developers.
At the top level, these businesses are similar in order of magnitude. Both Kaltura and Couchbase have roughly the same amount of ARR and growth. Both companies have eclipsed $100mm in ARR and continue to grow consistently in the mid-20’s.
Both businesses also have strong net retention (note: elite net retention is ~125%+) and large customers bases with Couchbase outperforming in the former and Kaltura outperforming in the latter. Of note, Couchbase has significantly better gross margins that are almost 30% stronger than Kaltura, which has a large professional services component to their business.
So why is Kaltura worth 40% more than Couchbase at the filing range? We believe the answer lies in sales efficiency. Despite very similar top-line metrics, Kaltura has a far more efficient go-to-market engine. Over the past year, Couchbase has spent almost 2.5x as much as Kaltura on sales and marketing to get similar results:
This type of capital-intensive sales engine challenges the prospects of longer-term growth and profitability which may give investors some pause. One way of visualizing sales efficiency is to use the Magic Number, which is a metric that measures the sales and marketing cost associated with an incremental dollar of ARR (or revenue). Generally, companies target a magic number close to or greater than 1.0 which suggests sales efficiency on every incremental dollar of ARR. As shown below, Kaltura is more than 3x more efficient than Couchbase in generating this incremental recurring revenue which may explain the gap in valuation.
Not financial advice.