Contrary Research Rundown #52
Unfreezing IPO markets, plus refreshed memos on Replit, Panther, and more
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Research Rundown
After a nearly two year pause in the tech IPO market, Instacart is expected to go public this month. The company set a target valuation of $9.3 billion for its IPO, a significant drop from its valuation of $39 billion in 2021 when startup funding reached an all-time high. Despite the reduced valuation, Instacart may be the first of a series of expected tech market IPOs in the second half of 2023.
2021 was a record year for the tech IPO market, featuring heavy hitters across categories such Toast (restaurant SaaS), Robinhood (stock trading), and GitLab (DevSecOps). Those companies hit a high in terms of market cap of $32 billion, $58 billion, and $18 billion respectively. Today? They’ve dropped to $11 billion (down 65%), $9.6 billion (down 83%), and $7.8 billion (down 57%) respectively.
Those are the public markets that companies like Instacart are carefully easing into. The global tech IPO market saw a 60% decline, from 661 in 2021 to 221 in 2022. Among these 221 tech IPOs in 2022, none raised over $1 billion, and only Mobileye, Intel’s self-driving car technology spinoff, raised over $100 million. So far in 2023, the number of tech IPOs remains low with no notable listings — that is, until Instacart.
A lot is riding on the performance of companies like Instacart and Arm. Arm went public this past Thursday before jumping 25% the next day. Companies are starting to warm up the necessary muscles to go public. For example, Turo filed updated statements with the SEC, potentially signaling a restart in its IPO plans announced in 2022. However, certain companies may be met very differently in the public markets.
Public markets have increasingly emphasized profitability over growth for the last 18 months or so. There are some companies that fit that bill, such as Klaviyo, expecting an IPO valuation of $6.8 billion. The company had $658 million ARR as of June 2023, with 17% free cash flow margins. On the other end of the profitability spectrum lies Databricks. While Databricks was able to raise an up round recently at $43 billion, the company is estimated to have burned $1.5 billion in cash in 2022, generating ~$1.6 billion in revenue.
As the public markets start to open back up, there are plenty of very different kinds of companies that will test the appetite that public market investors have for tech companies.
Replit is a browser-based collaborative integrated development environment (IDE). To learn more, read our full memo here and check out some open roles below:
Kraken is a cryptocurrency exchange that provides spot and futures trading for retail and professional investors looking to buy, sell, and use blockchain assets. To learn more, read our full memo here and check out some open roles below:
Senior Product Designer - Remote
Senior AI/ML Engineer - Remote
Cockroach Labs is a software company that develops a cloud-native, distributed SQL database for modern cloud applications. To learn more, read our full memo here and check out some open roles below:
Software Engineer, Developer Infrastructure - Toronto (Hybrid)
Staff Product Manager, Security, Trust and Privacy - US (Distributed)
Panther uses artificial intelligence to centralize, normalize, and analyze security data to enable cybersecurity teams to detect, investigate, and monitor security threats and misconfigurations at scale. To learn more, read our full memo here and check out some open roles below:
Enterprise Account Executive - US (Remote)
Principal Product Marketing Manager - US (Remote)
Cybereason is a cybersecurity company that provides endpoint prevention, detection, and incident response solutions. To learn more, read our full memo here and check out some open roles below:
Data Scientist - Tel Aviv (Hybrid)
Senior Sales Engineer - Tel Aviv (Hybrid)
Check out some standout roles from this week.
WorkOS | SF - SWE - Product, Product Designer, SWE
Perplexity.ai | SF (Hybrid) - Research Engineer (AI)
Hugging Face | NYC - Senior Technical Sourcer, Machine Learning
Pinecone | Tel Aviv - Director of Database Engineering
If you’re interested in learning more about Instacart and Turo following the IPO news and rumors, check out our memos.
Flexport’s CEO Ryan Peterson said that he is rescinding offer letters for candidates starting as soon as Monday. Flexport recently signed over 75 people to join. To learn more about Flexport, check out our memo.
Replit CEO Amjad Masad announced that Replit’s Ghostwriter Chat will default to the most advanced model on the market, which is currently GPT-4. To learn more about Replit, check out our memo.
WeAreDevelopers hosted a fireside chat with Prashanth Chandrasekar and Joel Spolsky co-founders of Stack Overflow, to discuss the company’s past, present, and future. The co-founders shared the 15 years of history and evolution of the company.
Harrison Chase, CEO of LangChain, was hosted on Latent Space to discuss the company’s origins, current scope, and future. LangChain’s AI toolkit is built to get LLM applications from prototype to production.
Lightspeed published its 2023 Benchmark Report discussing go-to-market and sales trends in SaaS.
The Saïd Business School at the University of Oxford and the early-stage VC OpenOcean released O3, claiming that it is “the world’s most accurate open access startup insights platform.”
British chip design company Arm raised nearly $5 billion in the largest IPO of 2023.
Databricks raised a $500 million Series I at a $43 billion valuation. The round was led by T. Rowe Price Associates. To learn more about Databricks, check out our memo.
Software development platform Linear raised a $35 million Series B led by Accel. To learn more about Linear, check out our memo.