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This is an extremely solid financial statement. $150M in revenue, growing ~100% per year; I'd project a valuation between $3B and $4B.

Twilio, Mulesoft, and MongoDB are probably the best comparables here -- open-source and dev-tools based SaaS IPOs. All of these were very successful at IPO and afterwards, and even compared to these, Elastic looks great.

* They're growing at almost 100% per year which is incredible. Twilio filed for IPO growing at 70% per year. Mulesoft was growing at 60%. Mongo was growing at 50%

* Losing $50M on $150M of revenue. (Net margins of -33%). This is pretty reasonable and in line with Twilio and Mulesoft. MongoDB was significantly worse at -60% net margins.

With that kind of growth I'd imagine something like a 220M ARR when they actually IPO, and valuation of 15-20x that.




Any time there is an IPO filing, I immediately come to the comments on HN, because there is always someone well versed in reading these things that can provide an excellent summary. Thank you!


Now we are just missing the <pedandic explanation of why the technology isn't really all that great if you are a super hacker, but completely missing the point of creating a product that solves peoples problems and marketing+supporting it well> comment like...

"It's really just a wrapper around Solr and a management layer bolted on top I don't understand all the rage!"


It’s really just a wrapper around Lucene and a distributed database and REST API bolted on top.

…I completely understand all the rage?


To be fair, their documentation is terrible. Trying to set up filebeat feeding into logstash and figuring out custom GROK patterns requires forensic-level Google-fu to sift through vague blog posts and grab small nuggets from forums because the official docs basically say nothing of value.


Honestly, SaaS is a relatively easy sector to value, since valuation tends to be a pretty straightforward multiple of ARR (with the exact multiple tending to be based on growth rate and (un)profitability). Throw in comparables of other IPOs with similar product types, and you can pretty reliably estimate how much a company will IPO at.


I see several responses that mention MongoDB for purposes of comparison and seem to conclude Elasticsearch fares favorably.

It should be noted:

[1] Unlike MongoDB (which is a ground-up build), Elasticsearch is basically an API layer on top of Apache Lucene. This is relevant because they haven't built and don't maintain, control, or own the source of their primary IP.

[2] Unlike MongoDB (General Purpose) Elasticsearch is a single purpose database and good at/used for one thing and one thing only. It searches text fields for text.

So its potential use cases and thus marketshare is far more limited.

[3] Posts on stackoverflow with the tag:

elasticsearch × 34,253 mongodb x 103,478


Elasticsearch is much more than a search engine.

Lots of people use it for analytics (checkout their aggregation/time series queries) as well as analyzing huge logs. Some people are starting to use it for machine learning use cases too.


I have seen it used almost exclusively for logging as part of the Elastic (formerly ELK) stack.


At my previous job we used it for a fair amount of analytics for our SaaS clients.


Even the "plain" ELK uses aggregations to produce those graphs.


Anyone that's tried to build anything non-trivial using ElasticSearch's aggregation API and MongoDB's aggregation API will just laugh at the idea of using MongoDB over ES. The ElasticSearch APIs are just so much nicer to use than MongoDB APIs.

MongoDB aggregation feels like writing code in assembler.


No one owns Lucene. If everyone stopped developing Lucene, Elastic could devote resources to it which they already do. I don't think that is a potential risk at all.


Lucene is open source, Mongo is open source. It's the same approach.

Elastic is used for search, log analysis and analytics.


Apache license vs AGPL is not the same approach.

MongoDB owns their code - Elastic does not own Lucene.


As a long time Elastic user:

[1] You don't understand their IP if you think it's Lucene. It really, really isn't.

[2] It's not single purpose anything. I've used it for search engines, event buses and as document stores. It's multi-purpose and more dependable at scale and under duress than Mongo thanks to sitting on top of the JVM.

[3] Stackoverflow stats don't mean anything. What are you trying to imply?


At this point Elastic is a lot more than a wrapper around Lucene/Solr as they have acquired many companies to build out their product offerings. That isn't necessarily a good thing, in my opinion they need to trim down their product from a hodgepodge of APIs to something that can be more easily put to use. The amount of work involved with getting something useful out is about the same that it would take to build a custom solution off Lucene/Solr.


I think calling it just an API later over Lucene is a bit dismissive. I’ve worked with search products built directly on Lucene vs ElasticSearch and there’s significant value add even without the API. In particular, sharding, replicating and managing indexes is trickier than you’d expect and took up a lot of dev time. ElasticSearch made that work go poof.


It is perhaps worth noting that the bulk of Mongo's operating losses were only paper: vesting stock options. I don't know why they wanted to keep that a secret from Wall Street, but it means that they got 6+ years' operating capital from the sale, not just 2. Keeping the secret meant they were motivated to shed people vesting too much, to make their apparent losses look smaller.

Wall Street smoke 'n' mirrors strikes again.


Elastic also has an excellent market position. They have far fewer credible competitors than Mongo.


Its really surprising there isn't more activity in this area. For instance Postgresql could really use some attention on its text search capabilities such as BM25 and TF*IDF and become a more capable competitor.


Except it's not HA nor doesn't scale out of the box, big difference.


I'm surprised that nobody mentioned cratedb (crate.io) in this thread. It is built on top of Lucene (and IIRC ElasticSearch), provides similar scalability, and fully supports SQL (both for inserts/updates and queries). They got a Series A a few months back.


Jepsen showed elasticsearch was pretty bad at partition tolerance. It was a pretty early version, but it would have been nice to see how much they fixed with another Jepsen run.

And distributed SQL of any complexity doesn't really scale. As soon as data that a join depends on is on other machines/nodes, you need quorums and dependent network I/O. Granted with high-speed networks that is getting to be less of a burden speed-wise, but the reliability problems still exist.


Hemorhaging money is not justified by the fact that 'others did it'.

WeWork and Uber can justify it by pointing out unit costs in stable markets, and say 'look we are profitable there, so all of our losses are due to growth'.

Elastic cannot say the same.

In fact Twilio and Mongo have also been hemorhaging money since the start, and it's going to take a hell of a lot of growth, then massive profitability for them to break even.

Venture Captial is now back to the dot-com bubble game of 'who's going to be the fool holding the bag' - basically, raise a pile of money, give away that money for free by selling at a massive loss, and then get naive retail investors to buy into the myth.

What if I raised $100M, bought some lumber, and sold it at a 50% discount to builders, gosh, I'd have a lot of customers! and then did an IPO -> look at the growth!

Twitter is what, 10 years old now?

They just reported their first profitable quarter ever! And guess what, userbase is shrinking!

They're billions in the hole, i.e. billions away from breaking even - they are a massive net financial loss for investors overall; the trick is of course to be an early investor (make money) and not a later investor (dupe).

This game is not designed, it's just a natural dynamic of a market with bad information and or dupes.

Just like the financial crash of 2008 could not happened if dumb German and Japanese banks were not buying up crap bundles thereby enabling local American banks to re-capitalize and go out again and make more bad loans (i.e. the system would have stopped because banks would have quickly run out of capital unable to sell their first batch of crap mortgages) ... in the same way, this VC game would not happen without rube investors somewhere who will actually pay a fortune for a stock like Twitter. There are many more reasons for this obviously.

Unfortunately, when there is shadiness, low-interest rates, not market interventions etc. - the name of the game is 'leverage' - not 'innovation' really. So it makes much more sense to buy your way into a market, than build yourself into it.

And by the way, this is not to take anything away from Twilio or Mongo as products - that's entirely separate issue. Maybe they are great, maybe they are crap, but we don't know because they are being given away at massive discounts so it's very hard to tell.

Sadly, in shady game of leverage, often 'it's the only way' because if you don't - someone else will. WeWork for example is leverage to the max with 0 wiggle room for risk. If there is a market correction and tenancy drops in any major market, they are wiped. Same for any company that's dependent on crazy valuations.

Companies going IPO while losing tons of money, without clear path to profitability ... is not necessarily a good sign.


Twilio hit profitability last quarter FWIW


15-20x is huge for a SaaS company this big. I’d be surprised if they get it. They’re a great company but that implies sustained insano growth.


Losing $50M on $150M of revenue. (Net margins of -33%). This is pretty reasonable and in line with Twilio and Mulesoft. MongoDB was significantly worse at -60% net margins.

Why is a -33% net margin “reasonable” instead of just being “less unreasonable”?


Worth looking at the 40% rule for SaaS: https://www.feld.com/archives/2015/02/rule-40-healthy-saas-c...

The rule states that a "sane" target for annual growth rate + profit margin is 40%. At a 100% YoY growth rate and -33% profit margins, Elastic is sitting at 70% -- making it pretty solid!


What is the 40% based on? Because there isn't a hint of justification in that post.

If customer acquisition costs are really high, then they're throwing good money after bad.

All of this talk of 'solid financials' while a company is losing money every quarter and whereupon there's no evidence of profit at the unit level ... is scary, it feels like one of those reddit ico pump-it-up chats.

It's all very highly speculative, is what it is. So let's hope it's a great company, with a solid offer and they manage the growth effectively.


You could say that.

You could also say that they are losing money today, and expecting to lose twice as much money next year.


Right. It's the first group who's buying the stock in the IPO, not the second.


Because it's expected for early stage companies: low CFO, high CFI, low CFF.

As they mature, CFO grows, CFI normalizes and CFF grows to profitability.


Market likely will be assessing them on billings and then afterwards looking for FCF expansion, and finally tracking Non-GAAP op. margin. At ~80% Y/Y FY'18 billings growth investors probably focus on that metric.




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