Snowflake's CEO shares how he get got a $1.5 billion valuation from Sequoia Capital just four years out of stealth mode
- Snowflake just raised $263.5 million at a $1.5 billion valuation in one of the biggest funding rounds of 2018.
- The growing cloud startup has impressed the VC world with its ability to bridge old school data warehouses with the cloud storage that companies want.
- Now, Snowflake CEO Bob Muglia says the company is looking to expand its global footprint, and could go public in the next few years.
Snowflake only left stealth mode in 2014, but you wouldn't know it from the amount of money the company has raised.
The San Mateo-based cloud-computing startup just hit unicorn status with $263.5 million in funding led by ICONIQ Capital, Altimeter Capital, and newcomer Sequoia Capital. That brings its total growth funding up to $480 million, with a valuation of $1.5 billion.
The rapidly growing company, which sells data warehouses for the cloud, now has around 1,000 customers including Adobe, Capital One, Sony Pictures, and Instacart.
These enterprises use Snowflake to bridge the gap between old school data storage systems that have been used for decades by large companies, and the more efficient forms of storage that are enabled by cloud computing. Snowflake essentially eases the transition to the cloud for companies that work with ginormous loads of data.
Now, with a hot technology and Microsoft veteran Bob Muglia as CEO, Snowflake is just a few years out from going public. Business Insider checked in with Muglia to find out more about his plans for the company and what it takes to raise a mega round and a unicorn valuation.
This interview has been edited and condensed for clarity.
Becky Peterson: Your team just raised $263.5 million. What do you plan to use it for?
Bob Muglia: We're going to use the money to expand our sales and services organization globally to bring the product to customers all around the world, and we're going to continue to invest in the team that [co-founder and chief technology officer Benoit Dageville] built.
We feel that we have a really substantive product and head start compared to anyone else. I think we're pulling further ahead and we're going to continue to invest.
Peterson: Are you already international?
Muglia: Yes, we have about 40 people in Europe right now, and five people in Australia. Both of those are new within the last year.
A year ago we were just bringing on board our first folks in Europe. And now we have over 40 people there. In fall we started hiring in Australia. We'll look toward Asia in the coming 12 to 18 months. Probably expanding into the Singapore region and Japan and Korea. Maybe someday China, but that's further out.
Peterson: Why wait on China?
Muglia: China's a tough market for any American company. If you look at where you want to expand, China is toward the tail end.
What we'll probably do is go where our customers want us to go. I know we have some large, multi-national companies that do a fair amount of business in China. And they have to keep data in China. So that's probably what will push us to that market.
Peterson: At $263.5 million, this funding round is large by any measure. From a business perspective, what is the advantage of having such a large funding round?
Muglia: Companies are moving actively and aggressively to the cloud. This funding allows us to take the technology and this service to market to all of our customers around the world and give them support the way they need it. We'll be investing in resources in sales and service to do that, and we'll be building our R&D team around it.
Why do we need so much money? It's a global world, there are a lot of customers out there.
Frankly, we're competing against some of the largest companies on the planet. Companies like Amazon, Microsoft, Google, Oracle. And although $263 million is a lot of money, it's a lot less money than they have.
We're competing with extremely well-funded companies with extremely strong cash positions, and this provides us with the financial resources and the capital we need to expand the product and compete in this global world.
Peterson: As a CEO and partial owner in the company, is there a disadvantage for you in taking such a large sum?
Muglia: You always worry about how much money you should take and in what period of time. But on the balance, whatever disadvantages exist are far outweighed by the ability to expand the company. In today's world, the way to succeed in technology is to have a product that is very broadly used, and to get out there. And this money provides us the ability to do that.
Peterson: How did this fundraising round compare to smaller rounds?
Muglia: This is my fourth time. I joined Snowflake in 2014. My first fundraising round was 2015, and it was great. It was a really successful round. At the time, our valuation expanded to $300 million. That was a huge increase.
The next year, we needed to raise a bit more money. This was the first half of 2016, and nobody was giving out any money.
I literally was up and down Sand Hill Road, my cup in hand. I talked to about 24 different VC firms, and all 24 of them said no. Fortunately, my existing investors stepped in and funded us a flat round. So we were able to continue to grow and hire world class people. And then last year we were able to do another round.
In this round, we're thrilled to have Sequoia join us as our newest partner.
Peterson: Was Sequoia one of the companies that said no to you in 2016?
Muglia: They sure were! At the time everybody was saying no to everything. It wasn't just us.
Peterson: Is this the first step in moving toward an initial public offering (IPO)?
Muglia: It is certainly a step in moving toward an IPO. That is where we are hoping to go in the next few years. It's not a near-term thing, but it's something we are looking towards. This funding basically provides us with sufficient capital we think to bridge ourselves to an IPO.
I wouldn't rule out us doing another round of private funding. But at this moment we think it's possible to move directly into an IPO in the future.
Peterson: Do you have a sense of how long it will be until you're profitable?
Muglia: It will be a few years - two to three years at least.
That's always the trade-off you make. When you're growing as fast as a company like Snowflake is, you want to invest as much of your revenue as you can, particularly into your sales.
Right now, my board is much more focused on growth than it is on profitability, but as the company shifts toward a public posture that obviously changes. We're taking steps to prepare.
The fundamentals are there with Snowflake to grow a profitable business. It's really a question of when do you take that revenue we have that we're currently investing into growth, and when do we put it back on the balance sheet and give it to our shareholders.
Peterson: Let's move on to the wider cloud industry. Are there any trends that you see looking forward?
Muglia: The one that's most apparent is that the cloud is happening aggressively with companies in every industry, as well as the federal government.
Another thing we see is that it is a multi-cloud world. Amazon is obviously the strong leader. I anticipate that they will maintain a leadership position. They've been a great partner to us. But we do see customers going to other clouds like Microsoft Azure, sometimes Google.
And we're customer centric, so we're watching that and you can expect us to respond to that customer request to work on multiple clouds.