Expensive, rigid and slow, for many the data warehouse market was considered dead, however, in less than a decade Snowflake has managed to do what many have failed to - bring the market back to life and reinvent the data warehouse. Operating under stealth mode since its inception, the company emerged two years later and with its data platform it proved to the world that it could harness the immense power of the cloud, offering thousands of organisations across the globe seamless access to explore, share and unlock the true value of their data.
Since then, both its customer base and revenue have been soaring at a remarkable pace, onboarding several major customers including Fortune 10 and Fortune 500 companies. It has generated $403 million in revenue over the past four quarters and has a market capitalisation-to-sales ratio of about 175x. Today, Snowflake has become a global force that has helped to mobilize the world’s data.
A brief history of Snowflake
For those who are unfamiliar with the company, Snowflake develops database architecture, data warehouses, query optimisation and parallelization solutions, allowing corporate users to store and analyse data using cloud-based hardware and software, while its Snowflake Data Exchange allows customers to discover, exchange and share data in a secure manner. What’s so appealing about it? The company combines the power of data warehousing, the flexibility of big data platforms and that of the cloud at a fraction of the cost in comparison to traditional solutions.
Founded in 2012 in San Mateo, California by three data warehousing experts and industry veterans - Benoit Dageville, Thierry Cruanes and Marcin Zukowski - Snowflake has managed to achieve jaw dropping growth despite having entered a field with steep competition and having to reckon with the likes of Amazon (AMZN), Microsoft (MSFT) and Alphabet (GOOGL) amongst others. Becoming one of the cloud computing front runners in Silicon Valley, as of September 2020 the company employs close to 2000 employees and operates in 19 countries, while it counts more than 3100 customers, including big names like Adobe, Capital One and popular designer dress and accessory rentals provider Rent the Runway.
The company posted earnings amounting to $96.7 million for the financial year ending January 2019, which almost tripled to $264.7 million in the financial year ending on January 2020. Boasting numerous accolades to its name, Snowflake reached second place on Forbes magazine’s Cloud 100 lists in 2019, while it ranked No.1 on LinkedIn’s 2019 US list of Top Startups. The company was also identified as a ‘Cool Vendor’ in Gartner’s Magic Quadrant and won first place at the 2015 Strata + Hadoop World startup competition.
With interest in the company nowhere close to cooling off and with the cloud computing provider having a tonne going on for it, it’s not surprising to see investors getting all excited about Snowflake.
From its name to its logo, Snowflake seems to have quite the affinity with the actual snowflake. There are three factors that prompted the founders to go for it. For starters snowflakes are formed in the clouds and fall through the Earth’s atmosphere as snow, whereas a data warehouse is built from the ground up for the cloud. On the other hand, the word snowflake has a meaning in data warehousing, whereby a data warehouse schema organised as multiple dimension tables surrounding a set of fact tables is one of the data architectures that Snowflake Inc supports. In addition, the founders are all snow sports enthusiasts.
Snowflake goes public
One of the most highly anticipated listings of 2020, attracting the likes of Warren Buffet and Marc Benioff, the company went public on September 2020 at $120 a share, above the target price of $100 to $110 per share. The price more than doubled in value, giving it a market valuation of $70.4 billion by the end of its first day of trading with shares closing at $253.93. In fact, just a day after its IPO, Snowflake announced that it had sold 28 million shares, raising $3.4 billion and making this the largest software IPO and the largest IPO to double on its first day of trading to date.
What’s so hot about Snowflake?
Without a doubt, 2020 has proven to be a roller coaster of a year and despite the S&P 500 having lost 31% between January and March, the shift to working from home and remote schooling has driven businesses to embrace the kind of digital tools that will help them remain operable. As a result, both tech and cloud stocks have benefited immensely from this trend, while it has given companies like Snowflake more business to chase, making it one of the most sought-after investment opportunities.
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