{"id":337514,"date":"2017-04-04T09:06:50","date_gmt":"2017-04-04T01:06:50","guid":{"rendered":"http:\/\/techcrunch.com\/?p=1472228"},"modified":"2017-04-04T09:06:50","modified_gmt":"2017-04-04T01:06:50","slug":"clouderas-ipo-will-test-unicorn-valuations","status":"publish","type":"post","link":"https:\/\/people.utm.my\/asmawisham\/clouderas-ipo-will-test-unicorn-valuations\/","title":{"rendered":"Cloudera\u2019s IPO will test unicorn valuations"},"content":{"rendered":"

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Alex Wilhelm<\/span> Contributor<\/span><\/p>\n<\/p><\/div>\n

Alex Wilhelm is the editor-in-chief of Crunchbase News<\/a> and co-host of Equity<\/a>, TechCrunch’s venture capital-focused podcast.<\/p>\n

More posts by this contributor:\n<\/div>\n<\/div>\n

Cloudera<\/a> filed to go public<\/a> mid-day last Friday, releasing a set of financial numbers that were the locus of anticipation: How would the company\u2019s recent performance stack up to its $4.1 billion valuation\u00a0set three years ago?<\/p>\n

Before Cloudera published its S-1 document \u2014 detailing its recent quarterly results and several years of financial data \u2014 reports indicated that the company would pursue a $4.1 billion valuation<\/a> in its IPO, flat from its last private round when Intel poured $740 million<\/a> into the company.<\/p>\n

That Cloudera might aim for a level valuation with a dozen or so quarters of additional growth under its belt was notable. (Crunchbase News reached out to Cloudera regarding the valuation figure. The company declined to comment.) The situation raises an obvious question: Did Cloudera\u2019s investors incorrectly estimate the potential future value of the company in 2014 if it intends to secure a flat valuation today?<\/p>\n

It is likely fair to say that Cloudera\u2019s investors were at least partially incorrect about where the company\u2019s value would end up by the first quarter of 2017. No one alive deploys three-quarters of a billion dollars in capital for a flat return over a multi-year period. And doubly, Cloudera may in fact\u00a0still<\/em> be overvalued at the proposed $4.1 billion valuation when compared to certain public market comps.<\/p>\n

We\u2019ll need to do some work to get there, but if you come along for this walk, I promise that we will learn something. Take my hand.<\/p>\n

Cloudera\u2019s guts and bolts<\/h2>\n

All Cloudera results are set to its own fiscal calendar, a yearly period that ends on January 31st. That recurring annual chronology is common among companies that sell to larger customers, as the month of December is slow, and sales denizens like to close their quarters on months that are non-holiday infused. So, effectively, January becomes your December.<\/p>\n

In its most recent fiscal year, which wrapped January 31st, 2017, Cloudera reported aggregate revenue of $261.0 million, up 57.2 percent from its preceding fiscal year. In that year, Cloudera\u2019s revenues were a more modest $166.0 million.<\/p>\n

Cloudera also lost $187.3 million \u2014 down 7.8 percent from its gut-busting prior-year loss of $203.1 million. Those are GAAP results, mind, not adjusted figures. (GAAP, a boring acronym, means:\u00a0\u201cNo accounting bullshit is allowed; how much did you really lose or make?\u201d<\/em>)<\/p>\n

The company has a mere $74.2 million in cash and equivalents in the bank. Compared to its quarterly losses from operations in its last few fiscal quarters (-$61.0 million, -$44.0 million, -$38.8 million and -$43.5 million), that amount of cash implies Cloudera is raising money because it needs to. This isn\u2019t uncommon in IPOs, but it is worth bearing in mind, all the same.<\/p>\n

If all those numbers blurred slightly in your head, it\u2019s understandable. What we need to do now is uncover what Cloudera is, in fact, worth. Spoilers: Cloudera is worth more than nothing and far less than the most valuable public company in the world, Apple.<\/p>\n

From that, let\u2019s narrow it down.<\/p>\n

The $4.1 billion question<\/h2>\n

Cloudera is a deeply unprofitable company with a history of both losses and quickly expanding revenue. So too, of course, are nearly all technology IPOs.<\/p>\n

Antigravity exists, however, between revenue growth and losses. The faster you grow, the more money you can lose both in raw dollar terms and on a comparative basis, while managing to keep your investors content. If you grow at, say, one billion percent per year, doubling your losses isn\u2019t a big deal. However, if you grew just 10 percent last year, and you lost 200 percent as much as the year before, you might be dead.<\/p>\n

(If you can unpack the inherent importance of baseline metrics in those examples, you didn\u2019t need the examples to grok the point, did you?)<\/p>\n

So Cloudera loses money, but we need to decide if that\u2019s a problem\u00a0or not. And to get a handle on it, we need to better understand growth.<\/p>\n

Let\u2019s put Cloudera\u2019s 57.2 percent revenue growth rate into context compared<\/a> to two recent, enterprise-facing tech IPOs, and everyone\u2019s favorite SaaS company, Box. From TechCrunch:<\/p>\n