Seven years after the spin-off from LinkedIn, the cloud software developer Confluent goes public.
Confluent, which sells software that allows developers to quickly move data for use in applications, filed its initial public offering prospectus Tuesday in an attempt to become the newest corporate company to go from an open source project to a multi-billion dollar public company.
Revenue in the first quarter rose 51% year over year to $ 77 million, with the majority of revenue coming from subscriptions. The company’s rental loss rose from $ 33.6 million to $ 44.5 million as sales and marketing expenses skyrocketed.
The foundation of Confluent’s software is Apache Kafka, which started within LinkedIn. Confluent founders – Jay Kreps, Jun Rao, and Neha Narkhede – founded Kafka in 2011 and then founded Confluent in 2014 with an investment of approximately $ 500,000 from LinkedIn. The company was last valued at $ 4.5 billion in a round led by Coatue Management and Altimeter Capital last year.
“We scaled it for early use cases at LinkedIn to handle streams of billions of messages,” Confluent CEO Kreps wrote in a letter in the prospectus. “But even then, our ambitions were bigger. Kafka was developed as open source and we wanted it to be able to do a lot more than just serve a use case in a company. ”
Before Confluent, Cloudera and Hortonworks gained momentum by commercializing Apache Hadoop, which originated from Internet companies like Facebook, Google, and Yahoo. Hortonworks was spun off from Yahoo and merged with Cloudera in 2019.
As an independent company and then a combined entity, Cloudera and Hortonworks struggled to come up with a workable business model. On Tuesday, Cloudera agreed to sell to private equity firms in a $ 5.3 billion deal.
In the on-premises software space, Confluent said that Cloudera is some competition alongside IBM and Oracle. However, the main business lies with the large cloud infrastructure providers Amazon, Microsoft and Google, all of which also have competitive offerings.
Confluent had non-cancellable purchase commitments of $ 167 million at the end of 2020, primarily related to cloud agreements. The company generated 18% of its revenue from its cloud service in the first quarter, up from 12% in the year-ago quarter.
Confluent, which employs nearly 1,500 people, said in its prospectus that it is estimated that over 70% of Fortune 500 companies have used Kafka. According to the Confluent website, customers include Citigroup, Humana, Intel and Walmart.
Confluent offers its customers a traditional license and also has a community license for its software that provides access to the source code. The company said it “explicitly restricts others, including cloud providers, from taking this source code and using it to offer a competing Software-as-a-Service, or SaaS offering.” Amazon launched a Kafka-based service in 2018.
Morgan Stanley, JPMorgan Chase and Goldman Sachs are the lead underwriters of the IPO. The stock trades on the Nasdaq under the symbol “CFLT”.
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