The Monsters are Coming
Quick reads on Synk, Databricks, MongoDB, Confluent
Open source fundraising in the private markets is enjoying something of a golden era and any rumor of its demise seems to be greatly exaggerated. Both Snyk and DataBricks announced large funding rounds this month that reinforce viewpoints that their growth and revenue are massive. Snyk nearly doubled its valuation from March going from $4.7B to $8.5B and DataBricks moved $10B from $28 to $38 billion dollars [For reference, the open source OG Red Hat was acquired by IBM for $34 billion]. Living up to these lofty valuations will be tough, but the ever-expanding markets the two firms are operating within seem to support the thesis.
Snyk CEO Peter McKay stated to TechCrunch, “We do believe that a portion of this money will be for inorganic expansion. We’ve made three acquisitions at this point and all three have been very, very successful for us. So it’s definitely a muscle that we’ve been developing.”
SnykCon is coming up in early October for 3 days, so maybe we’ll find out more details behind their plans at their event.
Meanwhile, DataBricks CEO Ali Ghodsi stated to TechCrunch regarding the category they believe they’re creating - data lakehouse (data warehouse + data lake). “[Data lakehouses are] a new category, and we think there’s going to be lots of vendors in this data category. So it’s a land grab. We want to quickly race to build it and complete the picture.”
While this is exciting on the mega growth side of the house there are small fundraises and project beginnings taking off which will lead to the next generation of great open-source companies.
On the public side, MongoDB (MDB) and Confluent (CFLT) hit all-time highs with MDB up 23% (+$6bn in market value) and CFLT up 57% (+$6bn in market value) from their earnings announcements.
MDB’s last earnings announcement marked the 7-year anniversary of CEO Dev Ittycheria and he summarized that time period succinctly:
“We went from being a small private company with an interesting technology to disrupting one of the largest markets in all of software. Along the way, we changed how open source software is licensed, we introduced the new cloud service that required us to both partner and compete with the largest cloud providers, and we grew revenues 20-fold with a compound annual growth rate of over 50%.”
Meanwhile, CFLT’s first earnings announcement gave CEO Jay Kreps an opportunity to give investors more color into where their business is growing.
“I'm pleased to report that we began our life as a public company with strong second-quarter results. Revenue growth in the second quarter accelerated to 64% year over year totaling $88.3 million. Confluent Cloud revenue continued to outpace growth of our overall business with growth of 200% year over year. This is a significant acceleration from the trailing 12-month growth rate of 134%.”
As mentioned above, both companies added ~$6bn in market value despite being at very different parts of their company lifecycle. Part of the excitement in CFLT can be traced back to growth.
As shown above, tracking both companies quarterly results from the time they were at ~$29mm in revenue indicates that CFLT is growing even faster than MDB, who has been on their own sustained growth journey. In fact, CFLT has grown faster in almost every quarter and could hit their first $100mm quarter a full three months ahead of MDB. Investors have been more inclined to lean in on growth over the last 18 months and with proven selling models and enterprise appetite accelerating, we expect this trend to continue.
Not investment advice.
Private Markets
Databricks, building data lakehouses for the future of data and AI architecture, announced their $1.6B Series H led by Counterpoint Global.
Snyk, building the most trusted developer security platform, announced their $300M Series F co-led by Sands Capital Ventures and Tiger Global.
Corelight, the first open network detection and response platform, announced their $75M Series D led by Energy Impact Partners. [Disclosure: Shawn invested in this deal]
Ventana Micro Systems, building datacenter processors on open source RISC-V architecture, announced their $38M Series B led by Dr. Sehat Sutardja and Weili Dai.
Supabase, creating backend-as-a-service database tools, announced their $30M Series A led by Coatue.
Explosion, the company behind Prodigy, sells 5% of company for $6M to SignalFire.
Seqera Labsbuilding better data pipelines to find insights from unstructured information across silos (incl. for COVID 19), announced their $5.5M Seed led by Talis Capital and Speedinvest.
Unleash, announced their $2.5M Seed from Firstminute Capital, Frontline VC, Marten Mickos, and Nicolas Dessaigne.
Public Markets
To track the performance of COSS companies, we’ve created an equal-weighted index comprised of public names including: Kaltura, Couchbase, Confluent, MongoDB, Elastic, Talend (acq. by Thoma Bravo announced), Cloudera (acq. by KKR/CD&R announced), Rapid7, Fastly and Jfrog.
The COSS Index jumped into positive territory over the last two weeks but continues to lag the major indices this year.
COSS Index +2%
NASDAQ +17%
S&P 500 +19%
The COSS Index continues to track the NASDAQ with larger swings.
COSS Index +83%
NASDAQ +89%
S&P 500 +54%
COSS companies jumped 2.5 multiple turns over the last two weeks distancing them from their Emerging Cloud peers on large share gains from MongoDB and Confluent. All three indices continue to trade significantly higher than their rolling five-year average.
COSS Index: Current Multiple 18.7x | Five-Year Mean: 8.5x
Emerging Cloud Index: Current Multiple 14.3x | Five-Year Mean: 9.7x
NASDAQ Composite: Current Multiple 4.5x | Five-Year Mean: 3.3x
