Fundraising values cloud computing unicorn at $12.4bn
Snowflake, a fast-growing cloud database company, said that it had been valued at $12.4bn in its latest fundraising round, more than three times as much as at its previous round 16 months ago.
The soaring valuation had made it the most highly valued venture-backed information technology company, as well as one of the top 10 unicorns, or large private tech companies, in the US. It highlights the large amount of capital that is still chasing high-growth private tech companies, despite the after-effects of last year’s WeWork debacle, which led investors to narrow their big bets on to a smaller number of players.
The $479m funding round also shows that at least some companies that compete head-on with Big Tech are still able to raise substantial amounts. Venture investors have shied away from some markets that are dominated by the largest tech companies to avoid competition with such deep-pocketed rivals.
Snowflake offers the same sort of ability to store and query corporate information as a traditional database software company such as Oracle, with the difference that it was designed from the ground up to operate in the cloud rather than in customers’ own data centres. That has put it in head-to-head competition with services from the biggest cloud companies including Amazon Web Services, Microsoft and Google.
Frank Slootman, chief executive, said that the presence of three rival cloud computing platforms had reduced the threat that a start-up such as Snowflake would face being squeezed by a giant rival. That made the current environment different from when Microsoft’s PC monopoly gave it huge power over the rest of the software world, he added.
the increase in Snowflake’s valuation from its previous fundraising round 16 months ago
Also, Snowflake has itself become a big customer of the cloud companies, paying them to store its own customers’ data on their infrastructure, leading to an uneasy alliance. Without companies such as Snowflake to bring customers to their cloud platforms, Mr Slootman said, the bigger groups would have fewer ways of generating business, making them like “a Russian retail store — there would only be only one thing on the shelves”.
Set up in 2015, Snowflake was able to steal a march by being able to handle high volumes of simultaneous queries and hitting levels of performance and speed, said Soma Somasegar, managing director of Madrona Venture Partners, one of the company’s investors. That made it particularly well-suited to companies such as banks and health insurance providers that have high numbers of customers and transactions, he added.
Mr Slootman said Snowflake was on track to become cash flow positive soon without needing the money from its latest round. He described the investment, led by Dragoneer Investment Group, as strategic, since it also included the venture capital arm of Salesforce — a cloud software company whose customers have large amounts of data that could be handled by Snowflake.
Mr Slootman joined Snowflake last year after building up and taking two other prominent software companies public. One, Data Domain, was sold to the storage company EMC for $2.4bn after a bidding war with Dell, while the other, ServiceNow, has become one of the most highly-valued cloud software companies, at $65bn.
Snowflake has been considered a hot prospect for an initial public offering of its own. Mr Slootman said that, with the US presidential election pending, “there is high anxiety about what the markets will be like” later this year. However, he added that Snowflake would be ready to go public quickly if the conditions seemed right.
Mr Slootman said its revenue grew by 174 per cent last year and would soon top $1bn, though he did not provide a precise figure.