Confluent Inc. is targeting a $ 50 billion data management market that outperforms traditional database technology and plans to open this Thursday, making it the largest initial public offering of technology.

We will price the offer on Wednesday night and open trading on the Nasdaq the next day under the ticker “CFLT”.

Based in Mountain View, Calif., The company operates on the premise that data is no longer stored in traditional databases, but is always “in motion.” In short, Confluent specifies that the company no longer exists because the data is continuously updated in real time. By using software, they have become software in their own right.

Last week, Confluent hit the price bracket $ 29 – $ 33 per shareThis will bring in a profit of $ 759 million and a valuation of up to $ 8.33 billion. Unlike most other IPOs, underwriters such as Morgan Stanley, JP Morgan, and Goldman Sachs do not have the option of purchasing additional shares to cover their combinations.

With a nearly seven-year history, the company plans to go public during a period of struggling stocks at a recently publicized company. Renaissance IPO ETF since the start of the year
Initial Public Offering,
-0.05%

While the S&P 500 index is down 0.2%
SPX,
+ 0.33%

Nasdaq composite index with more than 12% and intensive use of technology
COMP,
-0.06%

It’s almost 10% ahead.

Here are five things you need to know before Confluent starts trading:

It all started as an internal project on LinkedIn

In front of Microsoft Corp.
MSFT,
-0.63%

LinkedIn workplace social network The biggest acquisition ever At the end of 2016, the idea behind Confluent was an in-house app created from the ground up called “Apache Kafka” which was eventually created by Confluent co-founders Jay Kreps, Jun Rao and Neha Narkhede in 2011. Developed from.

“What surprised us at the time was that there were 100 different technologies for data storage, but our most pressing need was not a data storage problem,” says today ‘business. CEO Krebs submitted it to the Securities and Exchange Commission. Fresh.

“What we needed to do was integrate all the different applications and data stores that make up a global social network into a cohesive system, which is an interconnected and complex system. It responds continuously and in real time to everything that is happening in the fabric. Software systems, ”Kreps explains.

The company claims that Confluent’s platform acts as a “real-time central nervous system” for all of these layers, instead of a network of applications and data streams that are connected unplanned through layers. software.

In addition, personalized customer experience, machine learning technology, the large amount of data generated by IoT appliances, and the growing adoption of cloud services by businesses are expected to dramatically increase all of this “data in motion”. I go.

Customers more than doubled their pandemics and more than 100 Fortune 500 companies

Overall, Confluent said it had more than 2,500 customers in March, up from more than 1,000 in March 2020.

Of those customers in March 2021, 136 were Fortune 500 companies, accounting for approximately 35% of revenue.

In March, Confluent said it had 561 customers with annual recurring revenue (ARR) of more than $ 100,000. This is a popular metric used by software as a service companies to show how much revenue they can expect based on their subscription. The company said the March 2020 ARR was an increase of 374 customers over $ 100,000.

Of these customers, 60 provided more than $ 1 million in ARR for 33 in March 2020.

As income increased, losses increased – and probably for a while.

Confluent’s revenue grew from $ 65.2 million in 2018 to $ 236.6 million in 2020, up 58% and 130% year-over-year respectively.

However, the company’s losses fell from $ 95 million in 2019 to $ 229.8 million in 2020, up from $ 41.4 million in 2018. This is a loss of 141% and 130 % year over year, respectively. First quarter 2021 revenue was $ 77 million, up 51% from $ 50.9 million in the previous year quarter, and net loss of $ 44.5 million, 32% more than the $ 33.6 million in the previous year’s quarter. ..

“We have experienced significant revenue growth over the past few years, but we don’t know if and when we will have enough sales to achieve or maintain profitability in the future,” the company said. Described in the latest S-1. Risk factor.

“We also expect costs and expenses to increase in the future, and if revenues do not increase, this could negatively impact future performance,” Confluent said. “We will continue to spend significant amounts to further develop our offerings, in particular the introduction of new offerings and features, expand our sales, marketing and service teams, drive new customer recruitment and expand our usage. We will continue to supply existing customers, support international expansion, and implement additional systems and processes to effectively expand operations. “

$ 50 Billion Market Opportunity Expected, Cloud Giants Are Competitors

Based on Gartner data, application and middleware infrastructure, database management systems, data integration tools, analytics and business intelligence market segment totals approximately $ 149 billion .

Confluent costs about $ 50 billion, and the total has grown to about $ 91 billion in about three years.

But there are a lot of big fish competing for this market, like Microsoft and Amazon.com Inc.
AMZN,
-1.38%
,
Alphabet Inc.
GOOG,
-0.23%

Google,
+ 0.01%

Google, Cloudera Inc.
CLDR,
+ 0.06%
,
International Business Machine Inc. of
IBM,
+ 0.96%

Redhat and Oracle Corp.
ORCL,
+ 0.93%
..

Not only that, Confluent operates the platform using public cloud services from Microsoft, Amazon, and Google. This poses a problem for Confluent when viewed as a threat.

“One or more of these public cloud providers use their respective controls in the public cloud to integrate innovation and preferred interoperability with their competitors, bundle their competitors and offer unfavorable prices. There is a risk of exploiting and excluding customer relationships in the public cloud, freeing us from the opportunity and differentiating ourselves from our customers in terms of contractual terms or regulatory requirements compared to customers in similar situations. We treat it in a certain way, ”explains Confluent.

The first investors and co-founders have 60% of the votes

The 23 million shares offered at the time of the IPO are Class A shares, with one vote per share. Pre-IPO shareholders have Class B shares, but with 10 votes per share, they give majority control to insiders and early investors.

Among them, Benchmark, a venture capital firm that started funding the business in 2014, holds the most votes. Benchmark owns 35 million Class B shares, or 15.1% of the votes cast.

Next is Index Ventures Growth, which started raising funds in 2015, owns 29.8 million shares and gives 13% voting rights.

Next, CEO Kreps wins 12.4% of the 29.6 million Class B shares, followed by co-founder Jun Rao with 24.4 million shares, or 10.6% of the vote.

Sequoia Capital, which began raising funds in 2017, owns 21.4 million shares, or 9.3% of the votes cast.

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