Is Snowflake IPO really worth it?

The Snowflake IPO is an highly anticipated tech listing of the year. The company is listing amid growing investor interest, with many seeking to buy shares in the cloud computing tech startup sooner rather than later.

However, Frank Slootman – Snowflake chief executive officer (CEO) – has stated that there is no real pressure to list from investors but, rather, an IPO is the next logical step after a few rounds of very successful fundraising.

At the same time, Slootman recognises that there is an inkling of pressure from current Snowflake employees and investors who are looking to cash in on their current share holdings and equity in the company.

The Snowflake IPO is going to be one of the most exciting listings for traders this year. On the back of the coronavirus pandemic, cloud computing solutions have seen increased demand as companies shift from office working to working from home.

Who are Snowflake’s current pre-IPO investors?

Snowflake’s current investors are Dragoneer Investment Group and Salesforce Ventures, an arm of Inc. Other investors include Sequoia, ICONIQ Capital, Altimeter Capital, Redpoint Ventures and Sutter Hill Ventures.

Dragoneer Investment Group and Salesforce Ventures led the latest round of fundraising in February 2020 – which helped to raise $479 billion.

It is uncertain how much money each of these investors has committed to Snowflake, and it is equally uncertain how much each stands to gain from the Snowflake IPO.

What’s the outlook for Snowflake?

The short-term outlook for Snowflake is positive because companies and individuals are looking more actively for secure and streamlined cloud computing solutions – especially as working from home becomes the norm.

Plus, if the most recent fundraising round is anything to go off, investor confidence in the company to post strong earnings after the IPO is high.

The long-term outlook for Snowflake will depend on how heavily companies rely on cloud computing solutions in the coming years, and on whether the company can continue to deliver on its business model once it goes public.

What is Snowflake’s business model?

Snowflake’s business model is built around cloud computing and data warehousing, with a stated aim to deliver where they say other data platforms and big data solutions fall short. They plan to achieve this by enabling ‘any user to work with any data, without limits on scale, performance or flexibility’.

Snowflake’s developers built a new data platform from the ground up for this very purpose, so that the platform is powerful, but also simple to use.

How has Snowflake been performing pre-IPO?

Snowflake has been performing strongly in the past year. CEO Frank Slootman stated that the company made well over $100 million in revenue in 2019, achieving a 174% increase in revenue on the previous year.

What’s more, the valuation of $12.8 billion that the company achieved after its fundraising in February 2020 was more than three times as big as its previous valuation of $3.9 billion in 2018 – indicating strong year-on-year (YoY) performance.

Who are Snowflake’s main competitors?

Snowflake’s main competitors are Google Cloud Platform, Microsoft Azure and Amazon Web Solutions (AWS). But, the company is undeterred by these three cloud computing behemoths, stating that the presence of three large rivals reduces the chance that a startup like Snowflake will be forced out of the market.

Should you consider buying Snowflake when it goes public?

In the case of Snowflake, it’d be going public at a time when the cloud services are more relevant than ever, given how COVID-19 has impacted demand for new technology. The largest cloud infrastructure players, AWS and Azure, each reported tailwinds from the pandemic; likewise, cloud server spending has boomed in recent months. 

Jake Page
Jake Page

Investor of 4 years and Managing Editor of Money Midnight, a news outlet focused on highly profitable investment ideas and bold underground research.

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