8 Oct 2020

The Investment Opportunity For Data Services In The Cloud

Mark Sherman

Managing Director

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By Mark Sherman, Managing Partner- Telstra Ventures

The public equity market is hot right now.

From mid to late March to today, the equity market is up a little over 40%. We’ve seen a lot of big companies take advantage of that. In the past few weeks, there have been a significant number of companies filing for IPO – Snowflake, Unity, Asana, Sumo Logic and AirBnB among many others that are part of a wave that are collectively driving an increase in the equity markets overall.

Cloud and the opportunities that come with it, particularly in data, have been heating up for some time. Snowflake’s successful IPO is a testament to that. It reportedly is the largest software IPO, ever, generating USD 3.4bn in proceeds, on its first day of trading

I spoke to MergerMarket recently and shared why Snowflake is a special company at a special time in the market.

It demonstrates how digital transformation is occurring at a global level – and this is being accelerated by the COVID-19 pandemic.

Snowflake is at the forefront of data warehousing and cloud. It has simplified and streamlined a previously time-intensive and highly complex task of analyzing and sharing data in the cloud, and they’ve brought it to enterprise customers and delivered immediate value.

Snowflake is a young company that is already trading at 75x next year’s revenues, and it still has a lot of room to grow, now that it has redefined the massive and rapidly expanding data warehousing market. That growth is justified because Snowflake is proof that the replacement of on-premise data warehousing by legacy companies like Oracle and Teradata, is not just possible, it’s essential.

Investment in cloud-focused companies has been a big focus for Telstra Ventures. Some of our recent investments include Crowdstrike, Gitlab, Skillz, Big Commerce, and Rancher. Rancher is a really interesting one as it falls within a specialization area within the cloud – Kubernetes. Kubernetes makes the movement of workloads in the cloud more efficient and it is an area that we have been spending a lot of time in, to understand the opportunity and it’s big. Rancher, a company we invested in back in July, is an example of how successful this can be.

At Telstra Ventures, Our M.O. has always been to identify extraordinary, emerging technology companies – early.

We do this by asking critical questions – where is the world heading and see how technology can support those trends? Part of that is to take the companies we invest in and socialize some of their ideas and solutions with Telstra and their customers to see where there could be a good fit. As each of our investee companies builds out functionality, people, and services, this can take 6, 12, or even 24 months, but the outcome ultimately leads to the best fit for all parties.

We’re witnessing an increase in the thirst for innovation among large enterprises, and we can expect to see a lot more IPOs in this space.