Snowflake ($SNOW) - Future Big Cloud Player with AWS - Azure Market Potential

Snowflake was first trading at around $120 a share - valuing it at an estimated $50 - 60 billion. The company was the highest valued software IPO ever and with revenues of around 250 million, they are valued more than Dell and Uber.

Just last February, which seems like a far away distant world now, they were valued around 12.6 billion in a private funding round.

Snowflake's CEO - Frank Slootman is a tech executive who is known for accelerating sales in mid-size tech firms and leading them to IPO. His experience is in hardware storage - helping transform Data Domain, a back-up hardware company. I competed against Data Domain often when I worked in business development at Quantum - a leader in tape backup. He also has European roots - as he is a dual citizen from the Netherlands and is a competitive sailor.

Snowflake works with cloud partners - AWS - running on their infrastructure - while competing with its various database solutions.

Slootman, the SnowFlake CEO's response on this issue:

"Does that create tension? Yes, it does. We also compete, and that creates a very complex dynamic, and depending on what day of the week it is, it can get a little testy. Basically think about it this way: Amazon loves having Snowflake, the Redshift people? They don't love us quite as much."

Snowflake's Value Proposition: A single, integrated platform that offers the only data warehouse built for the cloud; instant, secure, governed access to the entire network of data; and a core architecture to enable many types of data workloads, including a single platform for developing modern data applications.

Branding: Named snowflake after the founders passion for snow sports, the product and company name is highly attractive and cool sounding. To properly name a software and tech company is tricky, especially if the company is operating in an area that is hard to paint a branding of new innovation, such as in storage / data management. Snowflake sounds cheery and makes the product and company pop. The ticker is also $SNOW - which is genius in itself to attract retail investors.

Risks: Amazon is the primary risk associated with Snowflake. Amazon is known to venture into areas to gain market share - a recent example being its move to compete against Peloton. Snowflake, while netting increased revenue for AWS overall, does compete against one of its core cloud offerings. I guarantee that at this moment Amazon is strategizing a way to impede Snowflake's projected growth. With a valuation that is an estimated - 20x what SalesForce paid for MuleSoft in 2017, even a slight earnings miss or new competitive disadvantage initiated by Amazon could send the stock price downwards.

Financials -

This High Growth SaaS IPO Benchmarks remind me of seeing an athlete that has perfect metrics in the NFL combine. This is also evidenced by the investments from Berkshire Hathaway, that is known to typically avoid software IPOs, and Salesforce - that must be thinking now the around 7 billion in cash they paid for MuleSoft in 2017 was a bargain.

Sources:

https://interworks.com/blog/sparker/2018/03/08/introducing-snowflake-cloud-based-data-warehousing/

https://news.crunchbase.com/news/unpacking-the-6-5b-mulesoft-salesforce-deal/

https://www.cnbc.com/2020/09/16/snowflakes-ties-to-amazon-are-a-risk-as-investors-prepare-for-ipo.html

https://interworks.com/blog/sparker/2018/03/08/introducing-snowflake-cloud-based-data-warehousing/

Snowflake vs Redshift -

https://www.alooma.com/answers/why-did-you-choose-snowflake-over-amazon-redshift-for-your-cloud-data-warehouse