Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
What a Friday. This afternoon (mere hours after we released our regularly scheduled episode no less!), both Pinterest and Zoom dropped their public S-1 filings. So we rolled up our proverbial sleeves and ran through the numbers. If you want to follow along, the Pinterest S-1 is here, and the Zoom document is here.
Got it? Great. Pinterest’s long-awaited IPO filing paints a picture of a company cutting its losses while expanding its revenue. That’s the correct direction for both its top and bottom lines.
As Kate points out, it’s not in the same league as Lyft when it comes to scale, but it’s still quite large.
More than big enough to go public, whether it’s big enough to meet, let alone surpass its final private valuation ($ 12.3 billion) isn’t clear yet. Peeking through the numbers, Pinterest has been improving margins and accelerating growth, a surprisingly winsome brace of metrics for the decacorn.
Pinterest has raised a boatload of venture capital, about $ 1.5 billion since it was founded in 2010. Its IPO filing lists both early and late-stage investors, like Bessemer Venture Partners, FirstMark Capital, Andreessen Horowitz, Fidelity and Valiant Capital Partners as key stakeholders. Interestingly, it doesn’t state the percent ownership of each of these entities, which isn’t something we’ve ever seen before.
Next, Zoom’s S-1 filing was more dark horse entrance than Katy Perry album drop, but the firm has a history of rapid growth (over 100 percent, yearly) and more recently, profit. Yes, the enterprise-facing video conferencing unicorn actually makes money!
In 2019, the year in which the market is bated on Uber’s debut, profit almost feels out of place. We know Zoom’s CEO Eric Yuan, which helps. As Kate explains, this isn’t his first time as a founder. Nor is it his first major success. Yuan sold his last company, WebEx, for $ 3.2 billion to Cisco years ago then vowed never to sell Zoom (he wasn’t thrilled with how that WebEx acquisition turned out).
Should we have been that surprised to see a VC-backed tech company post a profit — no. But that tells you a little something about this bubble we live in, doesn’t it?
Rather than just focus on Facebook’s problems like his 2018 challenge, this year Mark Zuckerberg wants to give transparency to his deliberations and invite the views of others. Today he announced his 2019 challenge will be “to host a series of public discussions about the future of technology in society — the opportunities, the challenges, the hopes, and the anxieties.” He plans to hold the talks with different leaders, experts and community members in a variety of formats and venues, though they’ll all be publicly viewable from his Facebook and Instagram accounts or traditional media.
This isn’t the first time Zuckerberg has held a series of public talks. He ran community Q&A sessions in 2014 and 2015 to take questions directly from his users. The idea for Facebook Reactions for expressing emotions beyond “Likes” first emerged during those talks.
From his initial framing of the 2019 challenge, though, it already sounds like Zuckerberg sees more Facebook as the answer to many of the issues facing society. He asks, “There are so many big questions about the world we want to live in and technology’s place in it. Do we want technology to keep giving more people a voice, or will traditional gatekeepers control what ideas can be expressed? Should we decentralize authority through encryption or other means to put more power in people’s hands? In a world where many physical communities are weakening, what role can the internet play in strengthening our social fabric?”
The implied answers there are “people should have a voice through Facebook,” “people should use Facebook’s encrypted chat app WhatsApp,” and “people should collaborate through Facebook Groups.” Hopefully the talks will also address how too much social media can impact polarization, self-image and focus.
[Update: Zuckerberg asked me in the comments of his posts for some format and speaker suggestions. My ideas include:
- A formal debate between him and a civil but pointed critic.
- An independent moderator asking him questions with no pre-brief and/or selecting questions from public submissions.
- A talk where he’s challenged to never say the word “Facebook” while discussing larger issues facing society & technology.
- A mythbusting talk where he addresses the biggest Facebook conspiracy theories. An open discussion between him and Jack Dorsey.
- A referendum where he asks or is asked questions where the public can select from multiple-choice answers, with him then discussing the publicly visible tallies.
- A discussion with an early employee like Ruchi Sanghvi, Leah Pearlman or Naomi Gleit about how Facebook’s culture and priorities have changed.
- A talk with Bill Gates and Warren Buffet on longitudinal approaches to philanthropy.
- A round-table with high-achieving high school students about the next generation’s concerns about privacy and the internet.
- A talk with the heads of Messenger (Stan Chudnovsky), Instagram (Adam Mosseri), and WhatsApp (Chris Daniels) about how the arms of the company work together.
- A panel with top Facebook Group and Page admins about what the app’s most dedicated users want from the product.]
It’s nice that one of the de facto leaders of the world will shed more light on his thoughts. But given Zuckerberg is prone to sticking to his talking points, the public would benefit from talks held by moderators who don’t give the CEO all the questions ahead of time.
Hearing Zuckerberg’s candid thoughts on the inherent trade-offs of “bringing the world closer together” or “making the world more open and connected” could help users determine whose interests he has at heart.
Zuckerberg’s past challenges have been:
2009 – Wear a neck tie every day
2010 – Learn Mandarin Chinese
2011 – Only eat animals he killed himself
2012 – Write code every day
2013 – Meet a new person who isn’t a Facebook employee every day
2014 – Write a thank-you note every day
2015 – Read a new book every two weeks
2016 – Build an artificial intelligence home assistant like Iron Man’s Jarvis
2017 – Visit all 50 states he hadn’t already to meet and talk to people
2018 – Fix Facebook’s problems
Dell just announced that it has agreed to buy back the VMware tracking stock from the EMC acquisition. The company confirmed the buy-back price of $ 120 per share for a total of $ 23.9 billion. With today’s move, Dell will return to being publicly traded starting on December 28th.
Sixty-one percent of shareholders voted in favor of the deal. It’s unclear how Wall Street will deal with the $ 50 billion debt load the company is carrying as a result of that $ 67 billion EMC acquisition from two years ago, but chairman and CEO Michael Dell got the results he wanted.
“With this vote, we are simplifying Dell Technologies’ capital structure and aligning the interests of our investors,” Dell said in a statement.
A company spokesperson confirmed that Dell is going public again. “Portions of Dell Technologies have been publicly traded through, for example, VMware and the tracker stock. The NYSE:DELL Class C shares will enable investors to invest in the full breadth of Dell Technologies company.” In plain terms, that means the company will be sold on the New York Stock Exchange under the DELL symbol.
Part of the EMC deal was a payout to shareholders based on VMware tracking stock. VMware was a key part of the deal in that it was one of the more valuable pieces in the EMC federation of companies. It still runs as a separate company with separate stock listing.
There was much drama prior to this vote with activist investor Carl Icahn suing the company last month after Dell had announced a price of $ 21.7 billion for the tracking stock last July. The move did get Dell to move the needle on the price a bit, although not as much as Icahn had hoped.
With today’s vote, Ray Wang, founder and principal analyst at Constellation Research says that the company is looking to move away from activist investors like Icahn and Elliott Management to more traditional institutional investors. “Michael Dell is attempting to rid his short term activist shareholders for more mid- to long-term institutional types as he goes public again,” Wang explained.
As the company returns to the public markets, it means it is in the fairly unique position of going from from public to private to public again. Dell originally went public in 1988 before taking the company private again in 2013 in a $ 24.4 billion buy-back.
At least one other company, Deltek, took a similar path over a decade ago. It was eventually was sold to private equity firm Thoma Bravo for $ 1.1 billion in 2012 before being sold again in 2016 for $ 2.8 billion.
Dell, which went private in one of the the largest leveraged buyouts in tech circa 2013, announced today that it will once again be going public through a relatively complex mechanism that will once again bring the company back onto the public markets with founder Michael Dell and Silver Lake Partners largely in control.
Dell’s leveraged buyout largely marked the final page in the company’s storied history as a PC provider, going back to the old “dude, you’re getting a Dell” commercials. The company rode that wave to dominance, but as computing shifted to laptops, mobile phones, and complex operations were offloaded into cloud services like Amazon Web Services, Azure and Google Cloud, Dell found itself navigating a complex environment while having to make a significant business transition beyond the PC era. That meant Dell would be beholden to the whims of public markets, perhaps laden with short-term pessimism over the company’s urgent need to find a transition.
The transaction is actually an offer to buy shares that track the company’s involvement in VMWare, converting that tracking stock into Dell Technologies stock that would mark its return as a publicly-traded company. Those shares will end up traded on the NYSE, around five years later after its founder took the company private with Silver Lake Partners in a deal worth roughly $ 25 billion. Silver Lake Partners owns around 24% of the company, while Dell owns 72% and will continue to serve as the chairman and CEO of the company. This move helps the company bypass the IPO process, which would remove the whole time period of potential investors scrutinizing the company (which has taken on a substantial debt load).
Dell said in its most recent quarter it recorded revenue of $ 21.4 billion, up 19% year-over-year, and over the past 12 months the company generated $ 82.4 billion of revenue with a net loss of $ 2.3 billion. The company said it has also paid down $ 13 billion of gross debt since its combination with EMC back in 2016. All this has been part of the company’s transition to find new businesses beyond just selling computers, though there’s clearly still demand for those computers in offices around the world. As it has expanded into a broader provider of IT services, it’s potentially positioned itself as a modern enterprise tools provider, which would allow it to more securely navigate public markets while offering investors a way to correctly calibrate its value.
DocuSign CEO Dan Springer was all smiles at the Nasdaq on Friday, following the company’s public debut.
And he had a lot to be happy about. After pricing the IPO at a better-than-expected $ 29, the company raised $ 629 million. Then DocuSign finished its first day of trading at $ 39.73, up 37% in its debut.
Springer, who took over DocuSign just last year, spoke with TechCrunch in a video interview about the direction of the company. “We’ve figured out a way to help businesses really transform the way they operate,” he said about document-signing business. The goal is to “make their life more simple.”
But when asked about the competitive landscape which includes Adobe Sign and HelloSign, Springer was confident that DocuSign is well-positioned to remain the market leader. “We’re becoming a verb,” he said. Springer believes that DocuSign has convinced large enterprises that it is the most secure platform.
Yet the IPO was a long-time coming. The company was formed in 2003 and raised over $ 500 million over the years from Sigma Partners, Ignition Partners, Frazier Technology Partners, Bain Capital Ventures and Kleiner Perkins, amongst others. It is not uncommon for a venture-backed company to take a decade to go public, but 15 years is atypical, for those that ever reach this coveted milestone.
Dell Technologies Capital president Scott Darling, who sits on the board of DocuSign, said that now was the time to go public because he believes the company “is well positioned to continue aggressively pursuing the $ 25 billion e-signature market and further revolutionizing how business agreements are handled in the digital age.”
Sales are growing, but it is not yet profitable. DocuSign brought in $ 518.5 million in revenue for its fiscal year ending in 2018. This is an increase from $ 381.5 million last year and $ 250.5 million the year before. Losses for this year were $ 52.3 million, reduced from $ 115.4 million last year and, $ 122.6 million for 2016.
Springer says DocuSign won’t be in the red for much longer. The company is “on that fantastic path to GAAP profitability.” He believes that international expansion is a big opportunity for growth.
Rackspace, which was taken private in a $ 4.3 billion deal in August 2016 by private equity firm Apollo Global Management, is reportedly in consideration for an IPO by the firm, according to a report by Bloomberg.
The company could have an enterprise value of up to $ 10 billion, according to the report. Rackspace opted to go private in an increasingly challenging climate that faced competition on all sides from much more well capitalized companies like Amazon, Microsoft, and Google. Despite getting an early start in the cloud hosting space, Rackspace found itself quickly focusing on services in order to continue to gain traction. But under scrutiny from Wall Street as a public company, it’s harder to make that kind of a pivot.
Bloomberg reports that the firm has held early talks with advisers and may seek to begin the process by the end of the year, and these processes can always change over time. Rackspace offers managed services, including data migration, architecture to support on-boarding, and ongoing operational support for companies looking to work with cloud providers like AWS, Google Cloud and Azure. Since going private, Rackspace acquired Datapipe, and in July said it would begin working with Pivotal to continue to expand its managed services business.
Rackspace isn’t alone in companies that have found themselves opting to go private, such as Dell going private in 2013 in a $ 24.4 billion deal, in order to resolve issues with its business model without the quarter-to-quarter fiduciary obligations to public investors. Former Qualcomm executive chairman Paul Jacobs, too, expressed some interest in buying out Qualcomm in a process that would take the company private. There are different motivations for all these operations, but each has the same underlying principle: make some agile moves under the purview of a public owner rather than release financial statements every three months or so and watch the stock continue to tumble.
Should Rackspace actually end up going public, it would both catch a wave of successful IPOs like Zscalar and Dropbox — though things could definitely change by the end of the year — as well as an increased need by companies to manage their services in cloud environments. So, it makes sense that the private equity firm would consider taking it public to capitalize on Wall Street’s interest at this time in the latter half.
A spokesperson for Rackspace said the company does not comment on rumors or speculation. We also reached out to Apollo Global Management and will update the post when we hear back.
MongoDB, a database software company based in New York, has filed to go public with the Securities and Exchange Commission as it continues to burn a ton of cash despite its revenue almost doubling year-over-year. The company, which provides open-source database software that became very attractive among early-stage startups, is one of a myriad of companies that have sought to go public by… Read More
Enterprise – TechCrunch
Facebook says it’s looking to become more open and transparent about its decisions, and it’s hired Liz Spayd, a former public editor of The New York Times, to consult on the process.
The hire comes as Facebook — or at least, parts of Facebook — seems to be wrestling with its role in the public sphere. There have been specific controversies, like the debate over… Read More
Social – TechCrunch
Facebook debuts a Twitter-like ‘Latest Conversations’ feature that shows public posts about buzzing topics
Facebook is rolling out a new feature called “Latest Conversations” in its search results that will show the most recent public posts about timely topics that a lot of people across its network are discussing. The unit gives you a wider view of what people are saying about a news story or other subject by exposing you to sentiments being expressed outside your social circle. Read More
Social – TechCrunch