It's no secret that many startups, perhaps especially in tech, struggle with diversity. You start with your own network, and then you hire people who have the skills you need and fit your culture. Before you know it, you have a team that looks and thinks a lot like you.
You worry about how that comes across to employees, future candidates, and investors, and you want to make your team more diverse, but when you post jobs, you get even more applicants who don't really add to the diversity of you team.
A few tips that might help you find, attract, and keep more diverse candidates:
1) If your applicant pool isn't diverse enough, don't think you're stuck. It may be time to slow down and rethink your hiring strategy. What are you doing to build the right pipeline?
2) Build relationships with the tech community. In DC, we have Women Who Code, Black Code Collective, and other groups that are helping to make the tech scene here more diverse. I don't see enough small businesses and new startups getting involved with these groups, even though they're often looking for things like spaces to host Meetups.
3) Listen to your current employees. To quote Hillary Turnipseed, a local tech exec, to "create an inclusive workforce…it’s necessary to establish an environment and culture where employees are heard and valued. You want to set up a place where feedback from employees can be proactively brought to the leadership team." By listening to all your employees about their issues and needs, you'll also be giving your most marginalized employees a space to speak up and be heard.
4) Involve your employees in the hiring process. Make them a part of your story, brand, and marketing. Put them on interview panels. A diverse interview panel will help attract more diverse talent.
5) Don't accidentally focus on just one level or position within your company. For example, hiring more diverse talent should not mean only hiring more diverse talent for entry level roles.
6) Forgive honest mistakes. To borrow from the article I mentioned earlier, "A huge aspect of creating a good environment for diverse employees is to be aware of the pressures that minorities often feel. For me as a black woman, I sometimes put the weight of the world on my shoulders, just sort of by default. I don’t ask for help because I might be viewed as incapable."
You might notice that these tips have a common theme: you don't have to single anyone out or give anyone special treatment to make your company more diverse. Good practices like listening to your employees' feedback can go a long way.
Any other tips I could add to this list?
Unity Software, which sells a game development toolkit primarily for mobile phone app developers, raised $ 1.3 billion in its initial public offering.
The company, which will begin trading today with the ticker symbol “U”, priced its shares at the top end of its expected range, selling 25 million shares at $ 52 per share.
The company’s final IPO price came in far ahead of what Unity initially anticipated. The company initially expected to price its public offering between $ 34 and $ 42 per share, later raising its offering to $ 44 and $ 48 per share.
The public offering values the company at around $ 13.7 billion, a good step-up from its final private valuation of around $ 6 billion.
For Unity, the journey to the public markets has been long. The company was founded and as a business that creates software for developers to make and manage their games. In that sense, the company is more like an Adobe or an Autodesk, than a game studio like Activision Blizzard or King.com.
Users import digital assets (often from Autodesk’s Maya) and add logic to guide each asset’s behavior, character interactions, physics, lighting and countless other factors that create fully interactive games. Creators then export the final product to one or more of the 20 platforms Unity supports, such as Apple iOS and Google Android, Xbox and Playstation, Oculus Quest and Microsoft HoloLens, etc.
The company organizes its business into two areas: tools for content creation and tools for managing and monetizing content. In actuality, the revenue from the managing and monetizing content actually outstrips the revenue the company makes from content creation.
The Unity public offering will be the first big test of investor appetite for this new approach to game development and the business-to-business tools that enable the new wave of gaming.
And it’s important to note (as we do here) that Unity doesn’t generate a lot of revenue off of its position as arguably the most popular game development platform. In fact, Unity has been pretty bad at monetizing the game development engine. It’s the ancillary services for in-game advertising, player matchmaking and other features that have made Unity the bulk of its money.
And there’s still the company’s biggest competitor, Epic Games, waiting in the wings. Here again, the analysis from TechCrunch’s previous reporting is helpful.
[Unity] also will want to benefit from comparisons to Epic Games, given [Epic] was just valued at $ 17 billion and has much greater public name recognition and hype.
To accomplish this, Unity seems to be underplaying the significance of its advertising business (adtech companies trade at much lower revenue multiples). In the past, Unity referred to its operations in three divisions: Create, Operate and Monetize. At the start of August, the SVP and VP leading the Monetize business switched titles to SVP and VP of Operate Solutions, respectively, and then Unity reported the monetization business as a subset of its Operate division in the S-1.
Consolidating Operate and Monetize into one reporting segment obscures specifics about how much revenue the ads business and the live services portfolio each contribute. As noted above, this segment appears to be dominated by ad revenue which means anywhere from 30% to 50% of Unity’s overall revenue is from ads. That should reduce the revenue multiple public investors are willing to value Unity at relative to recent and upcoming SaaS IPOs.
There isn’t a publicly-traded game engine company to directly benchmark Unity against, nor a roster of equity research analysts at big banks who have expertise in gaming infrastructure. Adobe and Autodesk appear to be relevant businesses to benchmark Unity against with regard to the nature of the non-advertising components of the business and Unity’s stated vision. Compared to Unity, those companies have lower growth rates and generate operating profits though; more recent public listings of SaaS companies like Zscaler and Cloudflare are likely to be valuation comps by investors to the extent they focus on its subscription and usage-based revenue streams since their revenue growth and margins are closer to Unity’s.
Both Epic and Unity are moving to meet each other, Epic by moving downstream, and Unity by moving to higher end applications. And both companies are looking beyond core gaming at other applications as well.
As companies like Facebook, Microsoft, Niantic and others evolve their augmented and virtual reality ecosystems, Epic and Unity may find new worlds to conquer. If public markets can find the cash.
We all need to build. Some build physically, others virtually. Innovation never stops, and this year Oslo Innovation Week is bringing it to you, wherever you are. That’s right – this year, they are going digital! You’re invited to Oslo Innovation Week 2020 You could be a founder building a growth company, or an investor…
Over the past decade, a number of high-profile cybersecurity issues have arisen during mega-M&A deals, heightening concerns among corporate executives.
In 2017, Yahoo disclosed three data breaches during its negotiation to sell its internet business to Verizon [Disclosure: Verizon Media is TechCrunch’s parent company]. As a result of the disclosures, Verizon subsequently reduced its purchase price by $ 350 million, approximately 7% of the purchase price, with the sellers assuming 50% of any future liability arising from the data breaches.
While the consequences of cyber threats were soundly felt by Yahoo’s shareholders and widely covered in the news, it was an extraordinary event that raised eyebrows among M&A practitioners but did not fundamentally transform standard M&A practices. However, given the high potential cost from cyber threats and the high frequency of incidents, acquirers need to find more comprehensive and expedient methods to address these risks.
Today, as conversations accelerate around cybersecurity matters during an M&A process, corporate executives and M&A professionals will point to improved processes and outsourced services for identifying and preventing security issues. Despite the heightened awareness among financial executives and a greater range of outsourced solutions for addressing cybersecurity threats, acquirers continue to report increasing numbers of cybersecurity incidents at acquired targets, often after the target has already been acquired. Despite this, acquirers continue to focus due diligence activities on finance, legal, sales and operations and typically see cybersecurity as an ancillary area.
While past or potential cyber threats are no longer ignored in the due diligence process, the fact that data breaches are still increasing and can cause negative financial impact that will be felt long after the deal has closed highlights a greater need for acquirers to continue to improve their approach and address cyber threats.
The current lack of focus on cybersecurity issues can be partially attributed to the dynamics of the M&A market. Most middle-market companies (which constitute the nominal majority of M&A transactions) will typically be sold in an auction process where an investment bank is engaged by the seller to maximize value by fostering competitive dynamics between interested bidders. In order to increase competitiveness, bankers will typically drive a deal process forward as quickly as possible. Under tight time constraints, buyers are forced to prioritize their due diligence activities or risk falling behind in a deal process.
A typical deal process for a private company will move as follows:
- Selling company’s investment bankers contact potential buyers, providing a confidential information memorandum (CIM), which contains summary information on a company’s history, operations and historical and projected financial performance. Potential buyers are typically given three to six weeks to review materials before deciding to move forward. Unless there is a previously known cybersecurity issue, a CIM will typically not address potential or current cybersecurity issues.
- After the initial review period, indications of interest (IOI) are due from all interested bidders, who will be asked to indicate valuation and deal structure (cash, stock, etc.).
- After IOIs have been submitted, the investment banker will work with the sellers to select top bidders. Key criteria that are evaluated include valuation, as well as other considerations such as timing, certainty of closing and credibility of buyer to complete the transaction.
- Bidders selected to move forward are typically given four to six weeks after the IOI date to drill deeper into key diligence issues, review information in the seller’s data room, conduct a management presentation or Q&A with the target’s management and perform site visits. This is the first stage when cybersecurity issues could be most efficiently addressed.
- Letter of Intent is due, when bidders reaffirm valuation and propose exclusivity periods wherein one bidder is selected on an exclusive basis to complete their due diligence and close the deal.
- Once an LOI is signed, bidders typically have 30-60 days to complete the negotiation of definitive agreements that will outline in detail all terms of an acquisition. At this stage, acquirers have another opportunity to address cybersecurity issues, often using third-party resources, with the benefit of investing significant expenses with the greater certainty provided by the exclusivity period. The degree to which third party resources are directed toward cybersecurity relative to other priorities varies greatly, but generally speaking, cybersecurity is not a high-priority item.
- Closing occurs concurrent with signing definitive agreements, or in other cases, closing occurs after signing often due to regulatory approvals. In either case, once a deal is signed and all key terms are determined buyers can no longer unilaterally back out of a deal.
In such a process, acquirers must balance internal resources to thoroughly evaluate a target with moving quickly enough to remain competitive. At the same time, the primary decision makers in an M&A transaction will tend to come from finance, legal, strategy or operating backgrounds and rarely will have meaningful IT or cybersecurity experience. With limited time and little background in cybersecurity, M&A teams tend to focus on more urgent transactional areas of the deal process, including negotiating key business terms, business and market trend analysis, accounting, debt financing and internal approvals. With only 2-3 months to evaluate a transaction before signing, cybersecurity typically only receives a limited amount of focus.
When cybersecurity issues are evaluated, they are heavily reliant on disclosures from the seller regarding past issues and internal controls that are in place. Of course, sellers cannot disclose what they do not know, and most organizations are ignorant of attackers who may already be in their networks or significant vulnerabilities that are unknown to them. Unfortunately, this assessment is a one-way conversation that is reliant on truthful and comprehensive disclosures from sellers, lending new meaning to the phrase caveat emptor. For this reason, it’s no coincidence that a recent poll of IT professionals by Forescout showed that 65% of respondents expressed buyer’s remorse due to cybersecurity issues. Only 36% of those polled felt that they had adequate time to evaluate cybersecurity threats.
While most M&A processes do not typically prioritize cybersecurity, M&A processes will often focus squarely on cybersecurity issues when known issues occur during or prior to an M&A process. In the case of Verizon’s acquisition of Yahoo, the disclosure of three major data breaches led to a significant reduction of purchase price, as well as changes in key terms, including stipulations that the seller would bear half the costs of any future liabilities arising from these data breaches. In April 2019, Verizon and the portion of Yahoo that was not acquired would end up splitting a $ 117 million settlement for the data breach. In a more recent example, Spirit AeroSystems’ acquisition of Asco has been pending since 2018 with a delayed closing largely due to a ransomware attack on Asco. In June 2019, Asco experienced a ransomware attack that forced temporary factory closures, ultimately causing a 25% purchase price reduction of $ 150 million from the original $ 604 million.
In both the case of Spirit and Verizon’s acquisitions, cybersecurity issues were largely addressed through valuation and deal structure, which limits financial losses, but does little to prevent future issues for a buyer, including loss of confidence among customers and investors. Similar to Spirit and Verizon’s acquisitions, acquirers will typically utilize structural elements of a deal to limit the economic losses. Various mechanisms and structures — including representations, warranties, indemnifications and asset purchases — can be utilized to effectively transfer the direct economic liabilities of an identifiable cybersecurity issue. However, they cannot compensate for the greater loss that would occur from reputational risk or loss of important trade secrets.
What the Spirit and Verizon examples demonstrate is that there is quantifiable value associated with cybersecurity risk. Acquirers who do not actively assess their M&A targets are potentially introducing a risk into their transaction without a mitigation. Given a limited timeline and the inherently opaque nature of a target’s cybersecurity issues, acquirers would benefit greatly from outsourced solutions that would require no reliance upon, or input from a target.
The scope of such an assessment ideally uncovers previously unknown deficiencies in the target’s security and exposure of business systems and key assets, including data and company secrets or intellectual property. Without such knowledge, acquirers go into deals partially blinded. Of course, industry best practice is to reduce risk. Adding this measure of cybersecurity assessment is an excellent practice today and likely a mandatory requirement in the future.
If you’re a founder strategising how to land your next funding round at this challenging time, then taking on advice from venture capital firms can certainly give you a head start. A few weeks ago, we ran an article Tips on how to land funding during the pandemic, from Europe’s VCs, in which you can find the opinions of different firms on topics such as timeline, adapting your pitch and communicating remotely.
Today we’re getting inside the minds behind venture capital firm Digital Horizon, an investment company bringing together a venture fund and a venture builder. With presence in London, Tel Aviv and Moscow, the firm has an international focus and supports B2B software-based solutions and marketplaces.
We spoke with Managing Partner Irene Vaksman, who leads startup incubation, business development and deal execution, about changes to the European funding landscape, raising funds in the ‘new normal’ and tips for founders.
Hi Irene, thank you for joining us! Firstly, could you briefly explain what you offer early-stage tech companies to help them build and scale-up?
Digital Horizon is an investment company that brings together a venture fund with an international focus and a venture builder that launches and scales technology startups. I head up the venture builder arm focusing on the European markets. Our main objective is to leverage two sources of expertise – a deep understanding of a market vertical as well as hands-on practical co-creation experience – in order to launch competitive investable companies. We achieve this by providing initial funding and access to a professional shared services team that can take care of development, operations, back office, basically anything that is not essential to the product proving itself viable in the initial stages. Such an approach allows for sufficient cost reduction in those early stages. And of course the network that we keep building throughout is essential to gain access to industry professionals and corporate decision-makers alike. This sufficiently speeds up business concepts and tech hypotheses validation, agreeing pilots and generally paves the way for further business development efforts by the portfolio companies on their own.
I would also add that we accommodate both a founder-led model where we come on board as a co-founder and leverage available resources, and a model where a business concept is developed in-house and we engage an industry specialist under a ceo-for-hire model where an upside is available as part of the motivation.
Do you have any stats about your deal flow, and how this has changed over the years?
In our experience so far the venture build cycle is generally shorter than that of a VC fund. Over the last three years DH has launched seven ventures out of which there are two exits, three are in the final stages of closing the next external round and another two are under freeze subject to testing possible pivot strategies. Currently we’re in the early stages of venturing out a martech product as well as lining up several others within the core fintech space.
An MVP would normally take us anything from 2-4 months, that remains fairly stable, while we strive towards reducing time to market which has now come down to 10-11 months vs 18 in the initial stages.
Could you tell us your impression of the current Venture Builders landscape in Europe? Have you seen anything change in the past few years?
We see the development of the venture builder model as part of the execution risk reduction strategy for VC funds, allowing them to leverage the available resources and expertise in the early stage segment. Another stream is led by government funds as part of the overall industry development effort as well as a model for purpose-built ventures with a certain socio-economic effect, for instance financial education to reduce public debt and improve credit scores.
In recent years, we’ve also seen the role of corporations evolve significantly in the venture game driven by demand for advanced technological expertise, as well as valuable customer insight provided by innovative products in the market. We see that it’s in partnership with larger businesses that a lot of breakthrough companies are able to scale up – up to the point of being able to disrupt the industry and change it to the benefit of all those involved.
Since coronavirus hit, many VC deals have slowed down or fallen through. Have you noticed a rise or a fall in campaigns as a result? What’s the feeling?
Once the realisation that this is not just a short-term thing settled in most decision-makers’ minds, it did of course slow down the processes. All of the companies had to regroup and we were no exception. But I would say that this time has allowed everyone to re-prioritise, evaluate what is truly important for business and what is simply white noise, catch up on internal processes in order to come out of the quarantine in a better shape than we went in.
It has also shown to a lot of our strategic partners and potential clients that business automation is not just a trendy fad, something that’s nice to have or something that can launch a corporate career – under current conditions it becomes critical for the businesses to be able to perform. A great example of this effect is one of our portfolio companies, supply chain finance platform Factorin, that grew to over $ 100M turnover over the lockdown months with the nearest plans to introduce its platform to international markets. Another example would be the Swiss-based fintech Aximetria that has doubled the number of active users in the first half of 2020 despite the pandemic crisis.
What medium-term changes do you foresee the pandemic having on the way funds are raised by startups in Europe, in the ‘new normal’?
The pandemic has indeed disrupted the investment cycles for a lot of startups out there. Fundraising is a constant process and taking several months off is just not an option for most. This resulted in reduced valuations, second-tier investor choices or development freezes that would not be that easy to catch up on.
I would think that this experience would actually raise additional interest in the venture builder model, startup studios or similar formats that allow founders to weather the storm, re-allocate resources and reduce run rates in hibernation, or on the opposite – provide them with additional funds to speed up and get ahead of the competition scrambling for funds in “open waters”.
Do you see any long-term changes or shifts on the horizon in the next 5 years?
We feel that while the most low hanging fruit have been gathered over the last several years, it seems that pandemic has lasted long enough to create a shift in consumer and business behaviours, to create a different set of needs that have to be fulfilled with a wider set of solutions than those existing today. We place our bets on a more nimble segment of small to medium sized companies, which form a large part of any economy.
Being traditionally underserved as well as not necessarily ready to fully embrace the available tech solutions, SMBs were often lacking the appeal as a target audience, however, we see this continuing to change greatly over the next five years. And the trend of technologies getting deeper and more complicated poses a certain challenge to the funds to be able to spot and evaluate such companies. We see great synergies between the tech talent in the Digital Horizon builder team being able to lend its expertise to the VC fund for the tech due diligence processes.
What advice would you give to startups thinking of raising funds from cautious investors during the ‘new normal’? What are you looking for?
Like any other period of global change, it’s a great time to launch a business. We’re looking at two components – expertise and ability to move fast. Digital Horizon venture builder is constantly reviewing product concepts within fintech, martech and retail segments looking for co-founders with deep understanding of the unresolved issues and experience to drive this change.
We’ve seen a lot in the news recently about VC firms trying to increase the diversity and inclusion both within their teams and their portfolios. What’s your approach?
Whilst initially it wasn’t a purposeful objective, over time we came to a realization that most key positions in the Digital Horizon venture builder are female led and this definitely has an impact on how we approach things. Flexibility and such instruments as inclusive design has proven time and time again that these are a great source and driver of sustainable business appeal and product differentiation.
What advice would you give to startups with female and underrepresented founders, who are currently experiencing pushback?
If we look at almost any profile of a successful entrepreneur we’ll see that a large part of their day-to-day life is about overcoming difficulties and solving all sorts of problems along the way. Traditional business setup, regulatory frameworks, society as a whole are prone to resisting change, which is driven by innovation. And only those with enough resilience are able to create real shifts and changes. The underrepresented groups have a lifetime of experience powering through the barriers, and building on this background can be a great driver in achieving success as an entrepreneur.
Starting a business requires a delicate balance of hard work and high level decision-making. As the owner of your business, you determine the course of the company, the products you sell, and the strategies you adopt to promote your brand. However, the day-to-day work determines how you get there, and without hands-on leadership, your long-term vision may take much longer to execute. Striking a delicate balance can be a challenge for any entrepreneur.
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Here’s what you need to know about leading your team to success:
Engaged leaders connect with employees
There are many reasons to be a hands-on leader. One of the most important is what happens when you create and foster connections with your employees.
There’s an old adage in business that employees don’t leave companies, they leave managers. This means that people don’t want to work for faceless corporations; they prefer to connect with the people leading the company. As the owner and leader of your business, you can work closely with your employees and motivate them by expressing your personal drive and vision.
According to a Gallup survey, only 22 percent of employees feel that their leaders have a clear direction for their organization. Furthermore, only 15 percent of employees strongly agree that their leaders make them feel enthusiastic about the future.
A motivated and engaged team works harder, is more energized, and is less likely to quit, which in turn, reduces your turnover costs.
Hands-on leaders can win over customers
Not only can an engaged leader win over employees, boosting productivity and operations, but being engaged can also help retain customers. Typically, when a business owner is forward-facing and vocal about his or her company and its industry, customers feel more connected to the business.
While you won’t have personal interactions with customers on a daily basis, you can still get personal through your social media channels. Share both your triumphs and struggles, as this form of transparency will help your clients and customers connect with you on a more personal level.
In a BrandsGetReal survey, Sprout Social found that 70 percent of consumers feel more connected to a brand when the CEO is active on social media. Of those people, 65 percent also say when a CEO “uses social regularly, it feels like real people run the business.”
There are other ways besides being active on social media that can help you reap these customer loyalty benefits, too. Scott J. Corwin, attorney and principal of Scott J. Corwin Law, gives a great example of how he forges connections with his clients:
“I have too often heard from new clients that they were working with another law firm and they got passed along to junior attorneys or even non-legal staff and never had a chance to interact with the lawyer they hired. I put my clients’ interests first and foremost.”
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Tips for being a hands-on leader
It’s challenging to strike a balance between being a hands-on leader and taking on too many small tasks, which can deter you from the big picture of growing your business.
However, it is possible if you keep these simple tips in mind:
- Train your team: Make sure your team follows best practices across the board. Set a good example by making sure your team is onboard with your company mission, and how you put it into practice. You can correct any bad habits while also empowering employees to improve and learn at the same time.
- Recognize employee needs: As a leader, you must be tuned in to what your team needs (and wants). Deloitte’s 2020 Millennial Survey found that “Job loyalty rises as businesses address employee needs, from diversity and inclusion to sustainability” and more.
- Set aside time to work with different teams: Schedule a block of time each week to check in with each of your teams. Rather than trying to jump in here or there, build this time into your schedule until it becomes second nature.
Be a hands-on leader
You obviously know your business better than anyone else. Leading with a hands-on, personalized approach is a chance for you to stay connected with customers, clients and your team. At the end of the day, your customers will appreciate the personal touch and your team will enjoy the opportunity to learn working side-by-side with you.
The post How to Be a Hands-On Leader (and Why it’s Important for You Company’s Growth) appeared first on StartupNation.
When Snowflake filed its S-1 to go public yesterday, it wasn’t exactly a shock. The company which raised $ 1.4 billion had been valued at $ 12.4 billion in its last private raise in February. CEO Frank Slootman, who had taken over from Bob Muglia in May last year, didn’t hide the fact that going public was the end game.
When we spoke to him in February at the time of his mega $ 479 million raise, he was candid about the fact he wanted to take his company to the next level, and predicted it could happen as soon as this summer. In spite of the pandemic and the economic fallout from it, the company decided now was the time to go — as did 4 other companies yesterday including J Frog, Sumo Logic, Unity and Asana.
If you haven’t been following this company as it went through its massive private fund raising process, investors see a company taking a way to store massive amounts of data and moving it to the cloud. This concept is known as a cloud data warehouse as it it stores immense amounts of data.
While the Big 3 cloud companies all offer something similar, Snowflake has the advantage of working on any cloud, and at a time where data portability is highly valued, enables customers to shift data between clouds.
We spoke to several industry experts to get their thoughts on what this filing means for Snowflake, which after taking a blizzard of cash, has to now take a great idea and shift it into the public markets.
Pandemic? What pandemic?
Big market opportunities usually require big investments to build companies that last, that typically go public, and that’s why investors were willing to pile up the dollars to help Snowflake grow. Blake Murray, a research analyst at Canalys says the pandemic is actually working in the startup’s favor as more companies are shifting workloads to the cloud.
“We know that demand for cloud services is higher than ever during this pandemic, which is an obvious positive for Snowflake. Snowflake also services multi-cloud environments, which we see in increasing adoption. Considering the speed it is growing at and the demand for its services, an IPO should help Snowflake continue its momentum,” Murray told TechCrunch.
Leyla Seka, a partner at Operator Collective, who spent many years at Salesforce agrees that the pandemic is forcing many companies to move to the cloud faster than they might have previously. “COVID is a strange motivator for enterprise SaaS. It is speeding up adoption in a way I have never seen before,” she said.
It’s clear to Seka that we’ve moved quickly past the early cloud adopters, and it’s in the mainstream now where a company like Snowflake is primed to take advantage. “Keep in mind, I was at Salesforce for years telling businesses their data was safe in the cloud. So we certainly have crossed the chasm, so to speak and are now in a rapid adoption phase,” she said.
So much coopetition
The fact is Snowflake is in an odd position when it comes to the big cloud infrastructure vendors. It both competes with them on a product level, and as a company that stores massive amounts of data, it is also an excellent customer for all of them. It’s kind of a strange position to be in says Canalys’ Murray.
“Snowflake both relies on the infrastructure of cloud giants — AWS, Microsoft and Google — and competes with them. It will be important to keep an eye on the competitive dynamic even although Snowflake is a large customer for the giants,” he explained.
Forrester analyst Noel Yuhanna agrees, but says the IPO should help Snowflake take on these companies as they expand their own cloud data warehouse offerings. He added that in spite of that competition, Snowflake is holding its own against the big companies. In fact, he says that it’s the number one cloud data warehouse clients inquire about, other than Amazon RedShift. As he points out, Snowflake has some key advantages over the cloud vendors’ solutions.
“Based on Forrester Wave research that compared over a dozen vendors, Snowflake has been positioned as a Leader. Enterprises like Snowflake’s ease of use, low cost, scalability and performance capabilities. Unlike many cloud data warehouses, Snowflake can run on multiple clouds such as Amazon, Google or Azure, giving enterprises choices to choose their preferred provider.”
Show them more money
In spite of the vast sums of money the company has raised in the private market, it had decided to go public to get one final chunk of capital. Patrick Moorhead, founder and principal analyst at Moor Insight & Strategy says that if the company is going to succeed in the broader market, it needs to expand beyond pure cloud data warehousing, in spite of the huge opportunity there.
“Snowflake needs the funding as it needs to expand its product footprint to encompass more than just data warehousing. It should be focused less on niches and more on the entire data lifecycle including data ingest, engineering, database and AI,” Moorhead said.
Forrester’s Yuhanna agrees that Snowflake needs to look at new markets and the IPO will give it the the money to do that. “The IPO will help Snowflake expand it’s innovation path, especially to support new and emerging business use cases, and possibly look at new market opportunities such as expanding to on-premises to deliver hybrid-cloud capabilities,” he said.
It would make sense for the company to expand beyond its core offerings as it heads into the public markets, but the cloud data warehouse market is quite lucrative on its own. It’s a space that has required a considerable amount of investment to build a company, but as it heads towards its IPO, Snowflake is should be well positioned to be a successful company for years to come.