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PagerDuty pops nearly 60% in debut as tech IPO market heats up (cnbc.com)
120 points by romanhn 41 days ago | hide | past | web | favorite | 54 comments

Fun fact - this is the second YC IPO, after Dropbox.

I'm looking at the S-1 for Pagerduty. It doesn't mention Y Combinator. Who/what entity represents Y Combinator in the shareholdings? Can we guesstimate their return?


S-1s only list >5% stockholders - you'll note that the co-founders have been diluted down to 7.1%. Y Combinator has definitely been diluted below that amount, that being said random back of the napkin (aka pulled from my ass) numbers for their share count is probably 700,000ish so their return is pretty damn good.

You won't see them in there because their percentage is too small to be listed (under 5%).

Just looked up Dropbox stock price. Not exactly pretty. This is not the 90s when the retail investor could make money from tech stocks. SNAP is bad, Dropbox doesn't look good. Neither does Lyft.

On Dropbox, for context when a tech company IPOs there are typically "ratchets" in place that prevent all shareholders from selling stock right away, so initial investors, founders, and employees often each have their own 'hold off' time that can be anywhere from 3 months to a year.

Because of this dynamic, the stock price of the company a year after they IPO is a really interesting indicator of the 'retained' value of the company. Which is to say after anyone who has a big chunk of the company could sell (and that drives down the price) versus how many people are selling. This is where the float is maximized so the stock price is more closely tied to the market value rather than a scarcity value.

Dropbox's performance has been pretty solid in this regard, especially compared to things like GroupOn or Zynga (notable problem children) or SNAP (current poster child).

I don't own any DBX that I'm aware of (I may through an aggregated ETF so for the pedantic folks I leave that disclaimer in) but it wouldn't seem to be a "bad" investment for holding.

Are you mixing up “ratchets” with “lockup periods”? Ratchets are guarantees for investors that IPO prices hit a certain value other wise they get trued up by a certain amount. This happened to Square for their IPO.

Yes, I was thinking about lock ups.

SQ up 5.8x since Nov 2015

TEAM up 4.1x since Dec 2015

TWLO up 4.7x since Jun 2016

SHOP up 7.4x since May 2015

OKTA up 4x since Apr 2017

ZS up 2x since Mar 2018

Retail investors can definitely still make money.

400% more than alpha in fact:


(granted not all of those are IPOs in the last decade)

When you look at these results, it doesn't seem too risky to invest in a tech IPO, especially if the company "makes sense" [1]. These companies sound like solid businesses: Atlassian, Shopify, Square, Twilio.

This metric would have probably excluded Facebook, Twitter, Snapchat, and Lyft. I think Uber will also be a gamble. But PagerDuty seems like a solid company that will do well, and a far less risky investment than a social / ridesharing service.

Can anyone point out cases where a "reasonable" [1] company ended up underperforming or crashing a few years after an IPO?

[1] E.g. HN comments are generally positive, instead of "this is ridiculous".

How does the IPO works in US? Do retail investors get to subscribe to the IPO shares before the listing date? Or the retails investors can only "buy" the shares once they start trading on the exchanges?

> Do retail investors get to subscribe to the IPO shares before the listing date?

Generally no, especially if it's in high demand. My broker allows retail investors to place bids if they have over $250k in their account and agree, as a condition of having access to future IPOs, not to sell within 30 days. However there's still no guarantee of having your order filled.

The prices I quoted were from the first day of trading, not the IPO.

Which brokerage is this?

TD Ameritrade. You can either have 250k in your account or 30+ trades in the past 3 months. You'll need to fill out FINRA Form 5130.

MongoDB is another I believe

SNAP is up 105% YTD.

I wouldn't discount that company yet. Their market cap is actually fairly well priced right now, and I'd wager they are under-valued (assuming they execute well over next 6 months).

I see less and less people using it though (I've long since uninstalled) at least for my generation (30s). Unless it's still very very in with the younger crowd, I don't think it will do well long term.

Calling in from the 20s crowd. It's been years since anyone I know cared about snap. If it's not on Instagram, it didn't happen.

And I don't think the 40+ crowd is using it either. So it means either teens are using, or snapchat is on borrowed time.

Hasn't the userbase of snap always been teenagers sharing naked pictures with each other?

That was literally maybe for the first year or two. Since 2013 or so that's definitely NOT been the case.

My VGT holdings have been doing well. https://investor.vanguard.com/etf/profile/VGT

Ya, tech is one of the strongest performing sectors in the last decade.

There are plenty of gains to be had. I'm up 400% on FB, I'm up 200%+ on TWLO, HUBS, MU. I'm over 100% on PYPL, AMD.

I am down 5% on DBX.

and for a whole year of being public, dropbox kept dropping and now is 30% less than its IPO price.

Dropbox's "IPO price" was technically $21. It opened at $29, though so perhaps that's what you mean?

Just second?

Looks like investors were very hungry for this one and the high jump on the first date indicates that they are viewing Pagerduty in the same market segment as MongoDB and Twilio. Same set of customers, expanding market as each of those customers increase their server foot print.

Also with the 50% pop looks like investors were ready to give them future growth so the company definitely left money on the table with their IPO pricing.

But none the less amazing IPO. Hopefully stock stays in the range on Friday.

I don’t really get what makes this an amazing IPO. Afaict they left 33% of the money on the table. How is that a good thing for the company or the shareholders?

It would be good for people who bought in (higher margin), good for people selling in 6 months (employees), and bad for the company (money on the table).

Don't forget about the underwriters (investment bankers) who will be paid a hefty sum by Pagerduty (despite underpricing the IPO) and who also just got a ton of goodwill from their top trading clients who got those IPO allocations

I don't see how this is better for employees, assuming there is a stable price X, whether you price IPO at X * 0.8 or X * 1.2, by the time 6 months is passed and employees are able to sell, it probably have already converged to X.

This sounds right.

One way or another, that shouldn't be that big a deal.

The company doesn't necessarily raise that much on IPO day. The importance of raising that sum at a 20% higher/lower valuation probably isn't the biggest thing at stake.

The IPO isn't primarily fund raising, especially for this current crop of more mature unicorns. It's primarily liquidity generating.

I think its most likely due to high usage of the service & income of those who use the service. Devops can make bank, and devops need this SAAS.

Good for them. IIRC, don't they use a lot of elixir? Is this the first public company to have a big elixir tech stack?

The extent of their usage of Elixir is highly questionable. One of their employees was at elixirforum.com for recruiting but could not, or would not answer how much they use it for. There's also some partially substantiated rumors that the Elixir was a single employee's experiment, and those services were either in the process, or had already been re-written in Scala.

I left PD about 5 months ago, so my information might be slightly outdated, but I can confirm that Elixir is used quite a bit internally, including for highly available critical services that all event data passes through. While there might be some truth to Elixir starting out as an experiment, its adoption has not only spread to multiple teams, but it is also the language most new services are to be written in, going forward. The unique thing about Elixir is how it appealed to both Ruby and Scala folks internally.

To ruby folks, it's like faster ruby. What is the appeal to Scala folks? As formerly a Scala folk, it hasn't had much interest to me (but I have no negative feelings about it either, it has always been a "cool another language" to me)

I wasn't writing Scala day-to-day myself, but common (though by no means universal) objections were around complexity and difficulty of iterating quickly. The author of the Elixir post below also wrote a bit about his experiences with Scala - http://evrl.com/programming/scala/2017/04/04/scala-part-ii.h....

Scala brings functional programming to the JVM.

Elixir brings style to Erlang/OTP.

Comparing to Ruby is apples to oranges because Ruby's concurrency and operational foundation is weak. The better comparison is Erlang/OTP vs JVM, where JVM gets the edge on optimized performance, and Erlang/OTP gets the edge on concurrency & tooling. The appeal for Scala folk would be if you don't care about the JVM compatibility or raw performance, and want an opinionated ecosystem built from the ground up around the actor model.

Is Scala is beholden to Java garbage collection? I know one big advantage I like is that each process has separate GC so you can run it in certain situations without affecting the entire system

Mostly (there are some projects to do Scala not on the JVM, but I have never seen them be more than a toy). That said, the JVM GC is the (IMO) best GC out there, it is really good for many many situations. And then there are some paid JVMs if you want to trade latency guarantees.

A lot of Scala users like the Akka actor system. The actor model is a first-class library in Elixir (or more specifically Erlang/OTP)

Learning to understand the actor model in Elixir made me a much better programmer. I highly recommend taking the plunge, even if you don't ultimately use Elixir. Be prepared for a bit of a brain bender though.

Pro-tip: If you can't write a GenServer in Elixir from scratch, along with understanding all of the differences between casts and calls, you probably don't understand the actor model (at least how it's used in Elixir) very well.

This is pure gatekeeping.

I'm not sure what that means. Can you clarify?

I don't think this is correct, from [1]:

Today, we have a good mix of teams that are fully on Elixir, teams that are ramping up, and teams who are still waiting for the first project that will allow them to say, “We’ll do this one in Elixir.”

[1]: https://www.pagerduty.com/blog/elixir-at-pagerduty/

Which makes me wonder why the employee in question, Cees de Groot, was so adamantly refusing to answer the question in any sort of detail.

Maybe he just didn't want to put his foot in his mouth.

I cannot comment in any way on financial matters, but like Cees, I am a principal engineer at PagerDuty, and I can tell you that in terms of total LOC, our Elixir use may seem modest because we have a lot of code that was written X number of years ago in Ruby or Scala.

However, if we look at new services being developed, we use a lot of Elixir, it is our default choice.

This dichotomy is very usual in our industry. What we have reflects our entire history, and the history of tools available when we wrote all that code.

But what we write today reflects our priorities today, and the tooling available today.

Now ask me about front-end development. Yes, we have some CoffeeScript/Backbone still in production, but we aren’t doing any new work in it!

Very interested in seeing the opening days of both Pagerduty and Zoom (next week). So far PD has exceeded my expectations.

Their product ain't half bad either

Something scary about the current surge in IPOs.... Kinda feels like PEs are deciding the time to cash-out is now.

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