
New Relic files S-1 for IPO - neom
http://newrelic.com/press-release/20141110
======
inthewoods
Sales and marketing are roughly 1-to-1 with revenue growth, and the spent over
$100m in 2014 to make $63m in revenue. I don't find these metrics particularly
encouraging. Now this is a SaaS business where you're betting on LTV - but
these metrics are tough imho.

~~~
verelo
While I agree regarding the revenue growth, as someone who uses the service
heavily in production, there is significant lock-in and the product is great
value. If they continue to innovate this could be a good bet (one i will
consider making personally)

~~~
inthewoods
What's the lock-in? Are you saving the data?

~~~
verelo
I just find its one of those products that the more you use it the more you
simply cannot live without it. I could see someone copying the product, but
personally I'd probably continue with New Relic unless the price difference
was significant.

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jasondc
Link to actual S-1 document:
[http://www.sec.gov/Archives/edgar/data/1448056/0001193125144...](http://www.sec.gov/Archives/edgar/data/1448056/000119312514406260/d709327ds1.htm)

~~~
kiyoto
The consistency of their gross profit (around ~80%) is very impressive.

~~~
pdq
It's a software company. Since there's virtually zero cost of goods, you
expect a high margin.

They are burning a large amount of cash on sales/marketing. Presumably this is
forward looking, so it's probably not a big deal (ie upfront costs to get
long, multi-year contracts).

~~~
wazokazi
$37M in sales/marketing to generate $47M in revenue in first 6 months of 2014.
Are there metrics for Sales and Marketing expenses for a SAAS company that
could be used for comparison? Seems pretty high, but maybe ok for a fast
growing startup.

~~~
wslh
You can take a look at "Insight Ventures Periodic Tables of SaaS Sales and
Marketing Metrics" [1].

\- [1] [http://kellblog.com/2014/01/21/insight-ventures-periodic-
tab...](http://kellblog.com/2014/01/21/insight-ventures-periodic-tables-of-
saas-sales-and-marketing-metrics/)

~~~
bjelkeman-again
Thanks! That was really useful. It had several layers of depth that I can
spend quite some time on digesting.

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zinssmeister
Two impressive things: Founder still owns more % than any investor (27.3%) and
his Directors & VPs (12 people) together own 68.3% !

~~~
ChuckMcM
Their April round of $100M with a valuation of $1+B so figure that post money
on the IPO they will be $1.5 - $2B making 13 new multi-millionaires in the San
Francisco and probably take 13 houses off the market[2].

And the roughly 6,000 people in their networks will say "Man I could have been
doing that gig, only a matter of time until I find the one that makes me
rich!" and the circle continues.

[1] [http://techcrunch.com/2014/04/28/cloud-app-monitoring-
compan...](http://techcrunch.com/2014/04/28/cloud-app-monitoring-company-new-
relic-raises-100m/)

[2] One allowed exemption for insider selling without filing with the SEC is
certain types of mortgage expense. (which I think is still intact post STOCK
act but I'm not sure so don't trade on that before checking with legal
counsel)

~~~
viscanti
Those Directors/VPs/Founder were likely already pulling a decent salary (as
execs in any industry do). They could likely afford an apartment in the city,
so it should be a zero sum transaction for housing (12 houses might be
purchased and 12 lower cost housing options - relatively - will come on the
market).

Housing prices in SF will be unaffected by this. The issues are much more
nuanced (and mostly regulatory). This trope of "Post-IPO tech people are
ruining the housing market" isn't helping anyone, and might serve to confuse
some people unfamiliar with the actual housing market issues in SF.

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jgalt212
LTV. That's the key. With interest rates this low, you can pretty much justify
any sales and marketing expense so long as customer attrition is low.

If New Relic has a USP (I am not qualified to weigh in on this), then I think
they can go public and reward their investors with at least a market level
return.

~~~
jacquesm
They occupy a niche that Google has a hard time making work for them (too
complex) and Adobe so far doesn't really shine there either. Cue a takeover by
one of these two at some point in the future.

~~~
eloisant
What they provide is something that would make sense in Analytics. So who
knows, maybe some day Google will annound Customer Analytics as a part of
Google Analytics... For free!

It's not like they would be starting from scratch.

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aaronbrethorst
And that makes founder Lew Cirne 2 for 2 with Wily (acquired by CA) and now
New Relic. Not too shabby.

~~~
vm
Founder Lew Cirne still owns 27.3% of the company (wow!). More than any
investor or other shareholder. He raised $200M+ and took little dilution.
Awesome to see a repeat entrepreneur who knows what he's doing when
fundraising.

~~~
mors_ontologica
The Founder's Dilemna's had a good writeup on him. He knows what he's doing.

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baskind
I bet NewRelic spent at least $1m on T-Shirts & RC Helicopters

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booger1
Looks like they have a run rate of over $100M (25M in subscription revenue
last quarter) -- seems like they spent $100M to get to $100M+ in run rate -
typical saas model in early days

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modoc
Keep an eye on New Relic. Not only are they emerging as a really dominant
player in the APM space, but their heading into a very interesting space with
the evolution of their Insights platform. My $20 is they will push hard into
the BI and analytics space and could end up competing with Omniture and
similar players (successfully I think). This is a strong company with big
dreams and a good long term vision.

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dkhenry
Is it just me or do those numbers look really bad for a software company.

They spend as much on General Administrative as they do on R&D and they spend
3.6x , more on marketing and sales then they do on R&D.

~~~
spullara
Enterprise software companies spend a very small amount on R&D. Usually < 15%:
[http://www.zdnet.com/r-and-d-spend-critical-but-no-fixed-
for...](http://www.zdnet.com/r-and-d-spend-critical-but-no-fixed-
formula-2062304479/)

~~~
dkhenry
I didn't really think of New Relic as "Enterprise Software". They are a SaaS
Company. Most of the reason enterprise software has so little R&D is because
they spend all their resources customizing deployments for enterprise
customers.

~~~
chii
i think enterprise and SaaS are orthogonal descriptions. new relic is
definitely enterprise - as opposed to consumer (ala, dropbox). That their
product is a SaaS offering doesn't really make any difference.

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pdq
Now I see the rush for New Relic to acquire Ducksboard. Should be good for the
team, since they apparently took a large amount of shares through the
acquisition.

~~~
duckduck
100k shares at $17 estimated value, it is 1.7MM. Together with 2.3MM in cash,
at 4MM it is not really a "exit" but more of an acquihire. There seems to be a
performance-based additional 2MM, but still fairly small.

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jarjoura
Hmmm... wow I lost my bet that GitHub would have been the first of the hipster
Ruby on Rails companies to IPO. Though, I'm still betting they will be next.
New Relic is a great company that makes it very easy to keep on top of your
application servers. I look forward to this infusion of cash taking them to
the next level. Congrats team and good luck with the process!

~~~
bdcravens
What exactly is a "hipster Ruby on Rails company"? For better than half their
life (founded in 2008, mentioned they made the switch in this 2011 article:
[http://highscalability.com/blog/2011/7/18/new-relic-
architec...](http://highscalability.com/blog/2011/7/18/new-relic-architecture-
collecting-20-billion-metrics-a-day.html)) the piece that collects data was
ported to Java. Also, I'd think Twitter was far more hipster. :-)

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xpose2000
I think it's a great company but their risk factors section in their filing is
fairly alarming:

\- We have a history of losses and we expect our revenue growth rate to
decline. As our costs increase, we may not be able to generate sufficient
revenue to achieve and sustain profitability.

\- These investments may not result in increased revenue or growth of our
business. We also _expect that our revenue growth rate will decline over
time_. Accordingly, we may not be able to generate sufficient revenue to
offset our expected cost increases and to achieve and sustain profitability.
If we fail to achieve and sustain profitability, our operating results and
business would be harmed.

~~~
xwowsersx
Are there any filings that don't state such risk factors? Seems fairly
boilerplate, no?

~~~
matthewmcg
Yes and no. In theory, the SEC's rules[1] require that the risk factors be
things that are unique to the company (i.e. not risks that apply to stock
offerings generally). The factors you mention are common among new companies
but wouldn't be included for more mature companies.

Sometimes these factors are helpful. Sometimes they seem to represent the
product of a particularly imaginative lawyer or accountant. RSA once had a
risk factor stating that if an efficient means of factoring primes were
developed their business might suffer.[2]

[1][http://www.law.cornell.edu/cfr/text/17/229.503](http://www.law.cornell.edu/cfr/text/17/229.503)

[2][http://www.sec.gov/Archives/edgar/data/932064/00009501350200...](http://www.sec.gov/Archives/edgar/data/932064/000095013502001833/b41874rse10-k.htm)
search "prime"

