Rubrik, a privately held data cybersecurity company that raised more than $500 million, filed to go public after the bell Monday. Rubrik's choice to pursue an initial public offering now, on the heels of the debuts of Reddit and Astera Labs, could signal that the IPO market is warming for technology companies.
Rubrik last raised a letter round as a private market company in 2019, when it closed on $261 million at a post-money valuation of $3.6 billion, according to Crunchbase data. If the company is lucky, it may be able to price its IPO shares significantly higher than the previous preliminary round. Secondary market buyers have been bidding in recent months for shares that value the company at $6.6 billion. Caplight, a secondary data platform, estimates that the company's valuation will remain around $6.3 billion.
Rubrik sells a cloud-based data protection platform to enterprises. As of January, the company had more than 1,700 customers with annual commitments of $100,000 and nearly 100 customers who paid more than $1 million annually to Rubrik, according to its IPO filing.
Inside the growth rubric
Rubrik was initially described as a software business that was slowly growing and posted a net loss of $354 million in its most recent fiscal year.
From fiscal year 2023 to fiscal year 2024, which ends at the end of January this year, the company's revenue increased by just under 5% from $599.8 million to $627.9 million. However, subscription revenue increased by 40% over the same period, from $385.3 million to $537.9 million.
Increased subscription revenue, rather than traditional revenue, will be the driving force behind Rubrik's IPO success. The company started as a software company that sold products on a perpetual license basis. However, after several years, the company started moving to a subscription model starting in fiscal year 2019. The company has expanded its subscription (SaaS) services over time and told investors in its IPO filing that it expects non-recurring revenue to “continue.” This is because they currently do not typically offer perpetual licenses.
Rubrik's transformation to recurring revenue is nearing completion, with the company reporting that subscription-related sales eroded 91% of total revenue in the most recent quarter (ending January 31, 2024). ing. This is up from 73% in the same period last year.
The shift to subscription revenue has helped Rubrik improve its gross margins, rising from 70% in fiscal 2023 to 77% in the recently completed fiscal year 2024.
However, even with growth in the recurring revenue software business and improved gross profit, Rubrik's severe losses have not been resolved. The company's net loss increased from 46% of revenue in fiscal 2023 to 56% in fiscal 2024, totaling approximately $354.2 million for the 12 months ended January 31, 2024.
But despite its steep unprofitability, Rubrik's cash burn was relatively modest. The difference between net loss and operating cash deficit is not resolved by reducing high stock-based compensation. These amount to annual expenses in the single digits for the company. Instead, by prepaying assessable revenue, Rubrik was able to grow deferred revenue by hundreds of millions of dollars in recent years and limit net operating cash outflows over the same period.
Silicon Valley story
Rubrik's possible IPO could be a coup for Lightspeed Venture Partners, a prominent venture capital shop in Silicon Valley. Bipul Sinha, co-founder and CEO of Rubrik for the past 10 years, is a former partner at Lightspeed. According to Crunchbase, the venture capital firm led Rubrik's Series A and participated in all subsequent funding rounds. Investing in former partners is not unheard of in the venture world, with some companies even creating internal founder and entrepreneur roles. But the fact that Mr. Sinha's company came to market with 23.9% ownership in the hands of his former employer highlights how personal networks influence who gets funding in startup land. I have to.
Greylock is the other venture company with the most interest in Rubrik's IPO plans, with investor Aseem Chandna joining the board and selling Lightspeed shares ahead of the new stock sale. owns about half of Rubrik, or 12.2% of Rubrik's voting shares. By public recruitment. Greylock led Rubrik's Series B.
Other investors who led Rubrik's letter round did not meet the 5% threshold required for the company's S-1 filing, including Enrique of Bain Capital Ventures, who led the company's Series E.・Mr. Salem also participates in the board of directors. Other board members include former Puppet CEO Yvonne Wassenaar, Mark McLaughlin, also a Snowflake board member, and fellow Lightspeed resident and former Microsoft board member John Thompson. It is included. NBA player and investor Kevin Durant was previously announced as an advisor to the company's board of directors, but he is not listed in the IPO filing.
The founders are the kind of Silicon Valley A-list figures the VC community loves, demonstrating that these tech companies can have an incestuous relationship with each other through their personal networks. Relevant third-party disclosures point out that Mr. Sinha co-founded and currently serves on the board of another startup called Confluera. In fiscal year 2022 he Rubrik spent his $124,640 on his Confluera. Co-founder Alvain Jain is still the majority shareholder, but he is the man who founded Glean and is very familiar with the new beloved AI startup from his early days as a Google employee. It is being Rubrik reported in its S-1 filing that it has spent $356,000 on Glean since April 2021.
Rubrik says the purchases of technology products and services from Confluera and Glean were “negotiated in the ordinary course of business,” but highlights the connections that exist between many Silicon Valley operators. These connections can help founders repeat their previous successes by buying and selling from friends and former colleagues. Rubric S-1 does not indicate anything untoward, but it does suggest that network effects in the startup and venture world are based on relationships and geographic density in places like Northern California. It reminds me that there are many.
what is happening
There are currently more than 1,000 startup companies in the world with valuations of over $1 billion. Companies still in combat will have to exit and find ways to return funds to their backers. With the IPO market far behind the pace needed to clear these decks, many private market companies are waiting for a clear starting gun to pursue taking their companies public. If Rubrik's debut is priced and traded well, it could help other enterprise-focused software companies that aren't yet profitable go public. This should be welcome news for founders and venture capitalists alike.