Oct 28, 2021: The Information’s Creator Economy Summit

Venture Capital Enterprise Startups Cloud

As Software IPOs Pick Up, These Firms Could Be Next

There was a time when the leaders of software-as-a-service companies had to move their lips slowly when describing their business models to investors. No longer.  

After finally getting comfortable with how their businesses work, investors have flocked to the stocks of SaaS companies—which charge customers subscriptions for their software, rather than hefty upfront licensing fees—while a growing number of mature, well-funded companies are filing to go public. In the latest sign of investor enthusiasm for the sector, Zoom, a provider of a video conferencing service, raised the offering price for its shares on Tuesday and is expected to begin trading this week. The Information compiled a list of six companies that have embraced the SaaS model and are expected to stage their own IPOs in the next year or so.

The Takeaway
Investors are growing increasingly bullish on the stocks of software-as-a-service firms, encouraging more of them to sell shares to the public. The Information compiled a list of six companies in the sector—Snowflake, Segment, CrowdStrike, Databricks, Cohesity and Rubrik—that could be IPO candidates in the coming year or so.

While SaaS stocks took a dive in the fall over concerns about economic growth, they’ve been strong performers throughout 2019. An index launched last October to track the performance of more than 50 SaaS companies—the BVP Nasdaq Emerging Cloud Index—is up 34% since the beginning of the year, compared to 16% for the S&P 500.  

Last week, PagerDuty, a 10-year-old company whose software alerts developers and IT operations staff when applications are experiencing problems, raised $218 million in its IPO. Dropbox, DocuSign, SurveyMonkey and Zuora were all among last year’s SaaS IPOs. The workplace messaging company Slack is considering a direct listing of its shares, which will allow them to be traded publicly without raising new capital for the company.  

Despite having initial reservations about their slow path to profitability, investors have grown bullish over time about the business models of SaaS companies, in large part because of the predictable revenue stream that they generate. Customers, too, have warmed to buying software as a service, favoring the lower initial expenses that give them more leeway to invest in other areas of business.

“You’re seeing 15 years of investors being educated on the financial profile,” said Todd McKinnon, the chief executive of Okta, a cloud-based identity and access management company whose shares have quadrupled since a 2017 IPO.

Here are the six companies that have embraced the SaaS model and are strong IPO candidates (funding estimates and investor details for private companies come from CrunchBase). Unless otherwise noted, spokespeople for the companies either declined to comment, to do so on the record or didn't respond to requests for comment about their IPO plans:


Founded: 2012

Amount Raised: $929 million

Snowflake is fueling interest in a segment of the database market known as “data warehousing,” which companies use to build analytical applications from corporate data. Led by former Microsoft executive Bob Muglia, Snowflake has attracted customers from finance, retail, healthcare and other industries, including big names like Netflix and Capital One.

Snowflake has received $713 million in two rounds in 2018 alone, the latest of which valued it at $3.9 billion. While it doesn’t share its financials publicly, Snowflake revealed that its revenue grew 257% during its fiscal year that ended Jan. 31. Lead investors are Sequoia Capital, Sutter Hill Ventures, ICONIQ Capital, Redpoint and Altimeter Capital. Part of its appeal is that the data warehouse market hasn’t exactly been a hotbed of innovation in recent years. Amazon Web Services, the first cloud provider to launch a data warehouse service in 2012, hasn’t given it a major upgrade since then. AWS, in a press release last month, said it has added more than 200 new features and improvements to RedShift over the past two years. Snowflake also sells its software on AWS and Microsoft Azure, which means it can target a broad range of customer types, including retailers that don’t want to do business with AWS.


Founded: 2011

Amount Raised: $284 million

Segment, now valued at $1.5 billion after announcing a $175 million Series D round in early April, sells software that companies use to collect and manage data about how customers are using websites and mobile applications. Powered by a type of open source software called Analytics.js, Segment’s product also lets companies connect their customer data to third-party marketing and analysis tools in order to get a clearer picture of customer behavior. Segment’s customer list spans retail, cloud computing and business application companies, among other industries. Its investors include Y Combinator, GV, Accel, Meritech Capital Partners and Thrive Capital.


Founded: 2011

Amount Raised: $481 million

CrowdStrike targets the business market with cybersecurity software that protects corporate notebooks and desktop PCs from attacks. Founded by former security researchers from McAfee, CrowdStrike garnered headlines after the Democratic National Committee hired it to investigate a series of cyberattacks shortly before the 2016 election. CrowdStrike announced a $200 million Series E round last June that valued the company at $3 billion, and was also mulling an IPO at the time. CrowdStrike’s customer list features big-name investment banks like Goldman Sachs and Credit Suisse, as well as payroll software provider ADP. Investors include Warburg Pincus, IVP, General Atlantic, Accel and CapitalG.


Founded: 2013

Amount Raised: $497 million

Databricks is built on open-source software called Apache Spark, which lets groups of servers pool computing resources to process and analyze large amounts of data. Databricks has a close relationship with Microsoft, which joined as a new investor for its $250 million Series E funding round in February, which valued the company at $2.75 billion. Microsoft also works with Databricks to deliver a data processing service on its Azure cloud. Databricks’ customer list includes Viacom, Shell, Cisco Systems and HP Inc. Its lead investors are Andreessen Horowitz and New Enterprise Associates. A spokesperson for Databricks said the company's "goal is to build an independently viable company that will be successful many decades to come."


Founded: 2013

Amount Raised: $410 million

Cohesity, whose software allows companies to manage infrequently accessed data stored in backup systems, isn’t a pure SaaS company but has increasingly gravitated toward the model. In August, it announced a SaaS service that companies can use to mine data to gain insight into their businesses. Cohesity is the second high-profile startup for founder and CEO Mohit Aron, who also co-founded data center software company Nutanix. Cohesity announced a $250 million Series D round last June led by the SoftBank Vision Fund, which reportedly gave it a valuation of $1 billion (Cohesity didn’t disclose its valuation). Other lead investors include GV, Sequoia Capital, Qualcomm Ventures and Wing Venture Capital.


Founded: 2014

Amount Raised: $553 million

Rubrik’s software lets companies back up their data stored in private data centers and on cloud providers, and recover that data in the event of a fire or natural disaster. Like Cohesity, Rubrik isn’t a pure SaaS company. But last April, it launched a SaaS service that companies can use to manage their data. Rubrik announced a $261 million Series E round in January led by Bain Capital Ventures, which gave the company a $3.3 billion valuation. Other lead investors are Lightspeed Venture Partners, Greylock Partners, Khosla Ventures and IVP. Rubrik’s best-known investor outside of the technology industry is NBA star Kevin Durant of the Golden State Warriors, who is also an adviser to the company.

—Nick Wingfield contributed to this article.

Kevin McLaughlin has been a reporter at The Information since 2016, covering cloud computing, enterprise software and artificial intelligence. He is based in San Francisco and you can find him on Twitter @ KevKubernetes.