Snowflake files for IPO, taking on Amazon and Microsoft cloud database businesses

Frank Slootman, CEO, Snowflake

Source: CNBC

Snowflake, one of the fastest-growing cloud software companies in Silicon Valley, filed to go public on Monday after revenue more than doubled in the first half of the year to $242 million.

Snowflake's data warehouse technology allows businesses to store and manage data in the cloud rather than on legacy databases, making it easier for clients to quickly access and analyze critical information across the enterprise. The company counts on infrastructure from Amazon, Microsoft and Google to store the data while also competing with services from each vendor.

Led by CEO Frank Slootman, who joined the company early last year after retiring from ServiceNow, Snowflake is among the most anticipated IPOs this year. Airbnb is expected to go public in the second half after managing through a slump in revenue from a plunge in travel, and Palantir's public offering is also on the way soon. Late-stage venture-backed tech companies are taking advantage of a surge in the Nasdaq and demand for new names, now that Apple has passed $2 trillion in market cap, and Amazon and Microsoft are both over $1.6 trillion.

While Snowflake's revenue jumped from $104 million in the first half of 2019 to $242 million in the same period this year, its gross profit almost tripled, showing that the company is generating more earnings as it grows. Its net loss narrowed to $171.3 million from $177.2 million, which is still a hefty loss but one that investors can likely stomach given its rapid expansion rate.

Snowflake was founded in 2012 and started selling its platform two years later. Customers listed in the filing include Capital One, Sony, Adobe and McKesson. For the fiscal year ended Jan. 31, Capital One represented 11% of revenue.

Snowflake said Capital One migrated to its technology in 2017 and it "spread rapidly to additional lines of business to satisfy latent demand for greater data access within the broader organization and address new business opportunities." Snowflake's cloud data tools help Capital One reduce time required to add new workloads, allow for speedy analytics and meet the bank's "high availability and resiliency needs."

Because Snowflake's technology all resides in the cloud, the company has a hefty bill to pay for the infrastructure. It said in the filing that it's committed to spend $1.2 billion between August 2020 and July 2025 on infrastructure services. Most of its business is on Amazon Web Services.

Meanwhile, AWS has its own data warehouse called Redshift, Google Cloud Platform's is called BigQuery and Microsoft Azure has a relative newcomer, Synapse. The first line of the competition section in Snowflake's prospectus says that its rivals include "large, well-established, public cloud providers that generally compete in all of our markets, including AWS, Azure, and GCP."

Sutter Hill Ventures is Snowflake's largest shareholder, with a 20% stake, followed by Altimeter, ICONIQ, Redpoint Ventures and Sequoia. Slootman owns 5.9% and ex-Microsoft executive Bob Muglia, who Slootman replaced, owns 3.3%.

Goldman Sachs and Morgan Stanley are leading the offering. Snowflake plans to list on the New York Stock Exchange under ticker symbol "SNOW."

— CNBC's Jordan Novet contributed to this report

WATCH: Snowflake CEO Frank Slootman on the company's $479 million in new funding

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