One good thing about writing on a company that just filed for its IPO is the so-called silent period: they can’t comment and react to wild speculations.... This is of course not a reason to disparage said company -- especially since I deeply respect both the team and the technology it has developed (or contributed to develop).
This said, Hortonworks’ recent filing triggered a minor earthquake in the small circle of information management vendors, analysts and investors. Many have commented on the surprisingly low revenues and the astronomical losses that Hortonworks is still enduring. Of course, these numbers are fairly typical of a company at its stage, and on such an accelerated growth path. They are also a sign of a company on a fast track to success and that is a leader in its market.
However, it is highly unusual for a company to go public at this stage of its development. Hortonworks still has ample cash reserves and in any case is not seeking to raise astronomical amounts from the market. It seems that going public brings more drawbacks than benefits: basically, Hortonworks now has to open the kimono! Moving forward, they will be under intense scrutiny by the unforgiving crowd of investment funds and buy-side analysts.
There is, however, a very interesting angle in this IPO for a company that is fighting for mindshare in the Hadoop space. For most casual observers, it is hard to distinguish what differentiates Hortonworks from Cloudera or MapR (I am going to get killed by my friends there -- or maybe not, because of the quiet period…). And even for clients, who only care about picking a Hadoop distribution and are not interested by the philosophical questions of who has the most open source contributions or the most enterprise-ready data hub, the distinction is not always clear.
By filing first among Hadoop distribution vendors, Hortonworks is guaranteed to get the lion’s share of publicity for the foreseeable future. Any competitor who follows suit will be perceived as a copycat. And since it’s unlikely that said competitors can produce a more attractive balance sheet anyway, they would pretty much be in the same type of criticism.
Another aspect will likely serve them, and support their stock price after the IPO. Despite all the buzz and hype around big data, there is no real option for investors who want to play that market. The stocks that come the closest would be Splunk, Teradata, Tableau, Qlik, or Informatica -- but even these are mostly a stretch (disclosure: I own small amounts of stock in some of these companies, although not nearly enough to retire on.)
I attended Wikibon’s Big Data Capital Markets Day in New York last month, and saw there first hand the appetite for relevant and quality investments in the big data space. Hortonworks is likely to fit that bill. Will it be enough to make a market? Will it be enough to sustain the stock price, and the valuation of the company to the level investors expect? Time will tell, of course. And it will certainly help if they don’t fumble along the way.
Moving forward, the kimono is open, and -- beyond marketing -- execution is of the essence.
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