Snowflake, the cloud data platform, will start trading on the NYSE today under the ticker symbol “SNOW” after the largest software IPO in the exchange’s history — Snowflake has successfully placed 28 million shares at $120.00 per share, raising it some $3.4 billion at a valuation of over $33 billion.
The IPO saw Snowflake boost its price range to $100 to $110 a share from $75 to $85 just days before the placement, as demand surged.
Snowflake’s platform acts as a central data repository to let users “drive meaningful business insights, build data-driven applications, and share data”, as its S1 filing with the US’s Securities and Exchange Commission puts it. It can be run on AWS, Azure, or Google Cloud, priced on a usage-based, per-second model.
What is Snowflake though?
So what is Snowflake exactly? In short, the company’s offering comprises three independently scalable layers across storage, compute, and cloud services.
The first ingests structured and semi-structured data to create a unified data record. The second provides dedicated resources (via the cloud) to let users simultaneously access common data sets for many use cases without latency. The third optimises each use case’s performance requirements without administration.
The company supports the most common standardized version of SQL (ANSI) for relational database querying. It can also aggregate semi-structured data such as JSON with structured data in a SQL format, letting users access JSON data with queries in SQL, and easily join it to traditional tabular data. In short, it’s a way to pull together disparate data sets in different formats, have them in a central repository that is highly performant, build dashboards and query them rapidly.
Among the major UK-based customers it has won is supermarket chain Sainsbury’s — whose CDIO Helen Hunt told an audience in late 2019 that it was using the data platform to democratise data use across the business. (The slide below from Hunt’s presentation shows where Snowflake fits into that approach).
The company has also successfully poached customers from AWS, including sports app Strava, which took its 120 TB data warehouse off AWS’s Redshift in early 2019, in favour of snowflake. (The data warehouse serves in excess of 13 trillion GPS data points, 15 million uploads/week and 1.5 billion analytics, Strava said.)
The IPO puts even Facebook’s massively hyped NASDAQ listing in 2012 into the rear view mirror (Facebook raised just over $16 billion at the time) and emphasises the potential the market sees in companies offering the ability to help peers make use of their data — as the cliche has it, widely dubbed the “new oil”.
Snowflake says it serves 500+ million daily queries to a customer base of over 3,000. Despite its rapid growth (121% year-on-year in Q2) the company — like many tech startups — is burning cash at a massive rate and not profitable. Net losses were $178 million in 2019 and $348.5 million in 2020.
Snowflake (and clearly its investors) are unconcerned. They say as customers experience the benefits of our platform, they typically expand their usage significantly: pointing to a net revenue retention rate of 158% as of July 31, 2020.
Among the risks the company notes in its IPO filing, however, are its reliance on the cloud hyperscalers for infrastructure: “Our platform currently operates on public cloud infrastructure provided by AWS, Azure, and GCP, and our costs and gross margins are significantly influenced by the prices we are able to negotiate with these public cloud providers, which in certain cases are also our competitors.”
As companies look to break down data silos, Snowflake thinks it can dominate however, with its ability to help capture, organise and classify semi-structured data, support huge volumes, and ability to return queries hugely fast.