Snowflake went viral during its initial public offering, raising $3.4 billion in the largest software IPO ever.
The data warehouse company opened with an IPO price of US$1
The initial public offering is a windfall income for the company’s investors (including Madrona Venture Group). Madrona managing director S. “Soma” Somasegar said that the Seattle-based company invested in 2017 when the company was valued at approximately $500 million.
Somasegal said: “Sometimes you will find a team and a technology that is about to start.”
Madrona was not listed in Snowflake’s IPO filing because the company owns less than 5% of the company’s shares and did not disclose the value of its shares.
For Madrona, Snowflake’s investment is slightly different, the company usually invests in early stage startups in the Pacific Northwest. However, the company has expanded its geographic scope in recent years and launched a $100 million “acceleration fund” for late-stage companies in 2019.
Congratulations @SnowflakeDB-now officially listed on @NYSE! Fortunately to be part of this amazing journey! $ SNOW #SnowflakeIPO pic.twitter.com/0rY8tzyLt5
— MadronaVentureGroup (@MadronaVentures) September 16, 2020
In 2017, Madrona invested in Series E financing for the healthcare startup Accolade, which opened its second headquarters in Seattle in 2015. Accolade went public early this year.
Other Madrona portfolio companies that have gone public in the past five years include Smartsheet, Apptio, Redfin, and Impinj, which received funding from Madrona when they were founded.
Madrona’s investment in Snowflake represented the reunion of Bob Muglia, then Snowflake CEO, and Somasegar, who worked for Microsoft Muglia for many years. Somasegar leads Microsoft’s developer department, and Muglia serves as president of the company’s server and tools business.
Muglia owns more than 4 million Snowflake shares after reaching a deal to sell half of its shares to Warren Buffett’s Berkshire Hathaway. Accounted for 1.7% of the company’s shares, which is part of the IPO. As of today’s close, Mulia’s remaining shares are worth more than $1 billion. (Note: Muglia’s shares and valuation have been corrected since its release to reflect the Berkshire transaction.)
Snowflake was founded in 2012. A few months before the investment in Madrona, the company also opened a new engineering office in Bellevue, Washington.
Somasegar said: “It’s great to work with Bob and the team to build their business in Seattle and work hard to help them become a true multi-cloud solution.”
In July of this year, Madrona led Fauna’s $27 million financing, the company was founded by two former Twitter engineers and positioned itself as the leader of a new generation of application databases. Mulia is the executive chairman of the fauna.
Snowflake’s data warehouse is a special type of cloud database built for analytical applications. The company has more than 3,100 customers, including Brex, ConAgra Foods, Domino’s, JetBlue and Nationwide. It has more than 20 offices around the world, including the Seattle area hub, and is one of the world’s most valuable private technology startups before the IPO.
The San Mateo, California-based company more than doubled its revenue in the first half of 2020 to $242 million and a net loss of $171.3 million, down from $177 million in 2019.
Muglia previously led Snowflake as CEO for five years, but resigned in May 2019. Frank Slootman served as Chairman and CEO of ServiceNow from 2011 to 2017.
Dragoneer Investment Group, a supporter of Airbnb, Slack, Spotify, Uber and other giants, led a $479 million Series G round of financing in February, including Salesforce Ventures. The valuation of Snowflake this round is $12.4 billion. Other supporters include Altimeter; ICONIQ Capital; Redpoint Ventures; and Sequoia.
In its IPO application documents, Snowflake listed Amazon Web Services, Microsoft Azure and Google Cloud Platform as potential business risk factors. All three competitors have provided their own data warehouse services.
Snowflake said that the vast majority of its business runs on AWS. CNBC reported on Wednesday that the company’s relationship with Amazon “posed a long-term risk to IPO investors,” partly because of Amazon’s competing product Redshift.
Despite the ongoing pandemic and economic crisis, Snowflake is one of the few technology companies still applying for an IPO this year. Since the public offering, many stocks have traded at higher prices. Other companies including DoorDash and Airbnb are expected to go public soon. “The New York Times” reported: “Now is the wealthy time for Silicon Valley and Wall Street.”
Here are other comments on the IPO on Wednesday:
Snowflake IPO is the world’s largest software IPO, indicating that the market for enterprise software is still far beyond most expectations. With the exponential growth of data, devices and applications, what is already big today may grow 100 times in just a few years.
-Aaron Levi (@levie) September 16, 2020
I’m not a math genius, but if SNOW sells 28 million shares in the IPO at a price of $120 per share, and a few minutes later it is now $275, then they seem to have $4.3 billion left in the IPO.
So, on the one hand, congratulations to the IPO. On the other hand, 🤦♂️
-Spencer Rascoff (@spencerrascoff) September 16, 2020
Unconfirmed reports claim that Snowflake will open trading indefinitely.
-Dan Primack (@danprimack) September 16, 2020