The IPO calendar sure filled up in a hurry. But this is what we described when we published the last Candygram at the end of August – Deals Crowd September Starting Gate. In order to get some coverage out on these names prior to pricing I am going to share my raw roadshow notes as I do them rather than wait until they are fully crafted into a separate note. The first of those is below.

These three software deals are all already in marketing and will price next week along with 7 other deals as we go to press. Direct listing Palantir (PLTR) is scheduled for the following week and they announced a plan to sell 244M shares.

The three deals we are working on this week are all in software. We have JFrog (FROG) in the DevOps space which includes companies like Atlassian (TEAM). And Sumo Logic (SUMO) is similar to Datadog (DDOG), Elastic (ESTC) and Splunk (SPLK) which have all done well. Finally Snowflake (SNOW) is in the analytics space along with many others including Alteryx (AYX) and Palantir (PLTR).

And if Snowflake wasn’t already hot enough Berkshire Hathaway (BRK) announced they would be investing $570M in the SNOW IPO!

Here are my raw notes on FROG and SUMO:

  • JFrog IPO Notes
    • The “Liquid Software Company”
    • Based in Israel and started in 2008. Name comes from the fact that frogs only move forward. I’m not sure that’s true.
    • Symbol FROG on NASDAQ 11.6M shares 70% primary, shoe 1.7M
    • Filed at $33-37 per share
    • From developer to end user (like farm to fork?)
    • Company grew out of AlphaCSP which was a French company.
    • The foundation and MVP was Artifactory which was a management platform for binary packages
    • Low initial ASP and then land and expand model. Did $104.7M in 2019 which was up 65%. 1H2020 was $69.3M up 50%.
    • Interesting that 80% of the revenue is self-hosted versus cloud.
    • Of 5,800 customers only 286 are above $100K and 8 are above $1M.
    • Gross margins are good at 82%, R&D is 24%, S&M at 37% and G&A at 13%.
    • Non-GAAP operating income was 8% for 1H2020. Long term operating margin targets are 23% and 30% FCF. That involves G&A at 9%, S&M at 27%, R&D at 21% and GM staying at 80%.
    • They put their TAM at ~$20B using two methods
    • Valuation comes to $3.4B at the top of the range $37 is based on total shares outstanding of 90.4M shares. There are about 27M more shares out there if you count 13.7M options (avg exercise $3.97) and 13.4M shares to be issued as compensation and for the employee share purchase plan.
  • Sumo Logic IPO Notes
    • Offing 14.8M shares with 2.2M shoe. Use 100M for shares outstanding and at the top of the $17-21 range it’s $2.1B.
    • Sounds a little like a poor man’s Datadog.  DDOG fetches a $24B market cap (44x sales) they will like having it as a comp.
    • Tag line is “continuous intelligence” for organizations who want to “close the intelligence gap.”
    • Revenue was $155M for FY 2020 with 2,100 customers.
    • Founded in 2010.
    • Average revenue per customer was up 64% in Q2FY21 to $90K. Customers over $100K hit 330 up 41% and over $1M came in at 29 up 71% from FY 2019.
    • Gross margin is now 75% with decreasing percentages of operating expenses.
    • It’s the usual LTM with 20% operating margins coming with 80-82% GM, 32-34 SM, 18-20 RD and 6-8% for GA.
    • The demo didn’t really wow me. You definitely need to avoid filter failure in this context of xM alerts, yK signals and 8 insights. Mostly noise.




  1. Yernur on 09/10/2020 at 10:39 am

    So, in a nutshell, what’s your recommendations on these two IPOs?

  2. heuristocrat on 09/14/2020 at 7:30 am

    We’ve got quite a few coming this week. I’d probably take SUMO over SNOW for sure.

  3. Kris on 09/14/2020 at 7:31 am

    I’d take SUMO over SNOW. Lots of deals pricing this week though.

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