Datadog's IPO (initial public offering) filing provides key business and financial insights about the cloud, application and infrastructure monitoring markets.
- Updated September 10, 2019: Datadpog's IPO is seeking to raise roughly $528 million to $$607 million, at a valuation of $5.5 billion to $6.4 billion, according to a September 9 filing with the SEC.
- Related September 18, 2019: Datadog declines Cisco Systems takeover bid.
Here's a closer look at details from Datadog's earlier Form S-1 registration statement, which surfaced in August, and the potential implications for channel partners and MSPs (managed services providers).
First, some background: Datadog typically competes against Cisco AppDynamics, Dynatrace, New Relic, SignalFX, SolarWinds and other companies that provide various cloud monitoring tools. Much of the industry has focused on infrastructure and application performance monitoring (APM). But more recently, the conversation has shifted to digital experience monitoring (DEM).
The market for such tools has been hot but there has also been some turbulence. Dynatrace recently launched a successful IPO, and Splunk is acquiring SignalFX for $1.05 billion. But New Relic stumbled in its latest earnings call, blaming a weaker-than-expected financial forecast on some specific internal business challenges rather than market weakness or competition.
Amid that backdrop, Datadog is ramping up for its own IPO -- which seeks to raise roughly $100 million.
Datadog IPO: 10 Business, Financial, Technology and Partner Trends to Note
Bullet points one through nine below are based on Datadog's Prospectus from August 23, 2019. Item 10 is based on a third-party media source that also looked at the filing.
1. Company Milestones and Monitoring Services: Datadog was founded in 2010, introduced infrastructure monitoring for VMs and cloud services in 2012; expanded to application performance monitoring (APM) in 2017; moved into logging in 2019 and pushed into user experience in 2019. Overall, the company has:
- 8,800+ customers;
- 590+ customers that spend $100,000 per year (recurring) with Datadog; and
- 40% of customers that leverage two or more Datadog services;
2. Next Service - Network Performance Monitoring: Currently available in beta, Datadog Network Performance Monitoring enables the analysis and visualization of the flow of network traffic in cloud-based or hybrid environments. It allows the mapping of full-stack dependencies, and is fully integrated with the Datadog platform, the company says.
3. Revenue: Was $153.3 million for the six months ended June 30, 2019, up from $85.4 million for the first six months of 2018.
4. Net Loss: Was $13.44 million for the first six months of 2019, compared to a net profit of $498,000 for the first six months of 2019.
5. Target Users: The company mostly mentions developers, operations engineers and business users. Alas, managed services providers (MSPs) were barely mentioned in the filing.
6. Growth Strategy: The company points to four growth opportunities that involve (1) acquiring new customers, (2) cross-selling into the existing customer base; (3) investing in new products and R&D; (4) expanding outside of the United States. Alas, the four growth bullet points don't specifically mention channel partners or MSPs at all.
7. Channel Strategy: Dig deeper and there are some brief channel strategy references in the filing. The company notes that its sales team is segmented into four revenue generating areas:
- an enterprise sales team that sells to large businesses;
- a high velocity inside-sales team that is focused on acquiring new customers;
- a customer success team that handles new customer on-boarding and expansions in existing customers; and
- a partner team that works with resellers, distributors and managed service providers.
Each of those teams is further split regionally for geographic coverage across Americas, APAC and EMEA, Datadog notes.
8. Rivals: Within the filing, Datadog specifically mentions multiple rivals across several market segments. They include:
- On-premises infrastructure monitoring and systems management companies including IBM, Microsoft, Micro Focus International, BMC Software, Inc. and CA Technologies (now owned by Broadcom).
- Application performance monitoring (APM) companies such Cisco AppDynamics, Dynatrace and New Relic.
- Log management companies such Splunk and Elastic N.V.
- Native cloud monitoring solutions built into Amazon Web Services, Google Cloud Platform and Microsoft Azure.
9. Staff: As of June 30, 2019, Datadog had 474 employees in sales and marketing, and 462 employees in the research and development (R&D) organization. Overall company headcount was 1,212.
10. Bottom Line: Datadog has quick growth, strong SaaS metrics, slim operating and cash burn, and a history of the odd small profit and positive operating cash flow, CrunchBase notes in an upbeat look at the filing.
Next Moves
ChannelE2E will be watching to see how Datadog navigates the IPO process, and whether the company cranks up some of its channel- and MSP-centric statements in the process.
Also, we'll be on-hand for the SolarWinds Empower MSP conference in September. We'll check in with MSP attendees to see if or how they're leveraging Datadog in combination with SolarWinds for overall IT monitoring.
