April 12, 2024

Rubrik’s IPO filing signals a thawing of the public markets for tech companies

Rubrik, a data cybersecurity company that raised more than half a billion dollars in the private sector, filed to go public after the bell on Monday. Hot on the heels of the debuts of Reddit and Astera Labs, Rubrik’s choice to now pursue a public offering could indicate that the IPO market for tech companies is heating up.

As a private market company, Rubrik last raised a written round in 2019, when it closed at $261 million at a post-money valuation of $3.6 billion, according to Crunchbase data. The company could be lucky to price its IPO shares significantly higher than during the last round of primaries. Secondary market buyers have bid up shares in recent months that value the company at $6.6 billion. Secondary data platform Caplight estimates the company’s valuation to hover around $6.3 billion.

Rubrik sells its cloud-based data protection platform to enterprises. As of January, the company had more than 1,700 customers with annual contract values ​​of $100,000 and nearly 100 customers paying Rubrik more than $1 million per year, according to the IPO.

A look at Rubrik’s growth

Rubrik initially presents itself as a moderately growing software company with net losses that widened to $354 million in its most recent fiscal year.

From fiscal year 2023 to fiscal year 2024, which ended in late January this year, the company’s revenue grew from $599.8 million to $627.9 million, or just under 5%. However, subscription revenue rose 40% over the same period, from $385.3 million to $537.9 million.

Growth in subscription revenue, rather than existing revenue, is the engine that could propel Rubrik to a successful IPO. The company started life as a software company that sold its product on a perpetual license basis. However, after several years, the company began switching to a subscription model in fiscal year 2019. It expanded its subscription (SaaS) offering over time, telling investors in its IPO filing that it expects its one-time revenue “to continue.” decrease,” as it generally does not offer perpetual licenses these days.

Rubrik’s transformation to recurring revenue is nearing completion, with the company reporting that in its most recent quarter – the period ending January 31, 2024 – subscription-related revenue compromised 91% of its total revenue. That was an increase from 73% in the previous year’s quarter.

The shift to subscription revenue has helped Rubrik increase its gross margins, which rose from 70% in fiscal 2023 to 77% in the recently completed fiscal 2024.

However, a growing software company with recurring revenue and improving gross margins have not been able to overcome Rubrik’s heavy losses. The company’s net losses grew from 46% of revenue in fiscal 2023 to 56% in fiscal 2024, for a total of approximately $354.2 million in the twelve months ended January 31, 2024.

However, despite the high unprofitability, Rubrik’s cash burn has been relatively modest. The difference between net losses and operating cash shortfalls will not be resolved by eliminating comprehensive stock-based compensation; that’s single digit million annual spend at the company. Instead, the upfront revenue has helped Rubrik grow its deferred revenue by hundreds of millions in recent years and limit its net operating cash outflow over the same period.

A Silicon Valley story

Rubrik’s potential IPO could prove a coup for Lightspeed Venture Partners, a well-known Silicon Valley venture capital shop. Bipul Sinha, co-founder and CEO of Rubrik for the past decade, is a former partner at Lightspeed. The venture capital firm led Rubrik’s Series A and, according to Crunchbase, participated in all of its subsequent funding rounds. Investing in a former partner is not unheard of in venture circles, with some companies even expanding the role of founder or entrepreneur-in-residence internally. But to see Sinha’s company come to market with 23.9% ownership held by his former employer underlines how personal networks can influence who raises capital in startup land.

Greylock is the other venture capital firm with the most at stake when it comes to Rubrik’s planned IPO, with investor Asheem Chandna on the board and owner of about half of Lightspeed’s shares, or 12.2% of voting shares of Rubrik, before new shares are sold. in public offering. Greylock led Rubrik’s Series B.

Other investors who led the rounds in Rubrik did not meet the 5% threshold required for mandatory inclusion in the company’s S-1 filing, but Enrique Salem of Bain Capital Ventures, who led the Series E of the company, is also present on the board. Other board members include Yvonne Wassenaar, the former CEO of Puppet, Mark McLaughlin, who also sits on Snowflake’s board, and John Thompson, another Lightspeed resident and former Microsoft board member. NBA player and investor Kevin Durant was previously announced as a board advisor to the company, although he is not named in the IPO filing.

The founders are the kind of Silicon Valley A-list that the VC community loves, demonstrating the often incestuous relationships these tech companies can have with each other through their personal networks. The related third-party revelations reveal that Sinha co-founded another startup called Confluera, where he still sits on the board. In fiscal 2022, Rubrik spent $124,640 at Confluera. Co-founder Arvain Jain, who remains a major shareholder but has founded a new AI startup, Glean, is also well known from his time as an early Google employee. Rubrik reports in its S-1 filing that it has spent $356,000 with Glean since April 2021.

While Rubrik notes that the purchases of technology products and services from Confluera and Glean were “negotiated in the normal course of business,” they underscore the ties that exist between many Silicon Valley operators. Those same connections can help founders repeat previous successes by buying from and selling to friends and former colleagues. While the Rubrik S-1 doesn’t indicate anything untoward, it is a reminder that network effects in startup and venture circles are often based on relationships and their geographic density in places like Northern California.

What’s at stake?

There are more than 1,000 startups in the world today with a valuation of $1 billion or more. Those who are still in shape need to find a way to get out and return capital to their supporters. With the IPO market long behind the pace needed to clear the market, many private market companies are waiting for a clear go-ahead to pursue their own public offerings. If Rubrik can price and trade well in its own debut, it could help other entrepreneurial software companies that are still unprofitable also attempt to go public. That would be welcome news for founders and venture capitalists alike.

Leave a Reply

Your email address will not be published. Required fields are marked *