Data Sheet—Monday, August 1, 2016
We all know it’s been a slow year for tech IPOs, with just five companies choosing to brave the public stock market as of last Friday. But the ones engineered over the past few weeks have been memorable, for the right reasons.
Big data firm Talend, for example, debuted 54% above its IPO price of $18 last Friday and closed its first day up 42% at $25.50. Communications software specialist Twilio, which went out in late June, is trading at around $40, almost triple its $15 IPO price. Even though they serve very different markets, there’s one thing these companies have in common: an explicit focus on “responsible” growth.
Yes, both still lose money, but their CEOs say they aren’t planning to burn through cash (at least as much cash in the past) in their quest to add new customers. Talend actually managed to become cash-flow positive during the first quarter, while still growing its cloud subscription business by 40%, according to its IPO prospectus. “It felt lonely a couple of years ago when everyone was running the other direction,” Talend CEO Mike Tuchen told me last Friday.
It’s no coincidence that cloud file-sharing company Dropbox, last valued at $10 billion, is also talking up this metric—which CEO Drew Houston has said his organization achieved in the June quarter. That’s a feat that fierce rival Box—renowned for its hefty sales and marketing budget—hasn’t managed yet, although it’s on track to do so before the end of its current fiscal year in January 2017.
Which tech startup will chance an IPO next? There are plenty of possibilities in the pipeline, including Zuora, a specialist in software for managing subscriptions and other recurring revenue; Okta, which sells identity management software and is said to be exploring its strategic options with Goldman Sachs, and fast-growing MuleSoft, which specializes in data management and application programming interfaces. (Rival Apigee made its debut last April.) Listen for which ones are talking up the cash-flow-positive metric most loudly. Safe is the new sexy.
Uber moves on. Despite spending at least $1 billion annually to develop its presence with Chinese consumers, the ride-sharing company wasn’t able to turn a profit for the market. That drove its decision to merge its local operations with those of its fiercest local rival, Didi Chuxing—a tie-up worth an estimated $35 billion in revenue. Maybe Uber can put some of that money behind its $500 million initiative to develop its own mapping software, a move that would reduce its dependence on Google. Oh, and think about this: The deal means Apple now technically owns a chunk of Uber.
BITS & BYTES
Get ready for a dose of bioelectronics. Google’s parent, Alphabet, and pharma giant GlaxoSmithKline are contributing $715 million to a British venture developing devices that use a body’s electrical impulses to detect and treat chronic conditions, such as diabetes. (Fortune)
Tesla and SolarCity make things official. The electric vehicle pioneer and solar panel installer formally proclaimed a $2.6 billion merger on Monday morning, after a special committee took several weeks to consider an offer extended in June. The combined entity will sell everything from cars to energy storage systems. (Reuters)
Daimler doubles down on ride-sharing services. The German automaker is behind an eight-figure round (the exact amount isn’t known) for Blacklane, which is big in Europe. Its differentiator: It uses professional drivers who specialize in corporate bookings. (Fortune)
Why IBM and Cisco stock is hot. Both companies are enduring massive business model transitions. But they—along with several other old-guard tech companies—have been big gainers this year, largely because of the dividends they promise. (Wall Street Journal)
The days of smartphone contract discounts may be over. The four major wireless carriers—Verizon, AT&T, Sprint, and T-Mobile—are considering fee hikes now that subscription defections have stabilized. (Wall Street Journal)
Sheryl Sandberg is writing another book. The Facebook COO and Lean In author plans to focus on resilience in the face of profound loss, a skill she has honed since losing her husband, Dave Goldberg, suddenly a year ago. (New York Times)
WATCH FOR IT
Is Hewlett Packard Enterprise mulling life as a private company? A report in The Information suggests several private equity firms, including KKR, Apollo Global Management, and Carlyle Group, are considering a $40 billion deal. (Fortune)
IN CASE YOU MISSED IT
Here’s Why Facebook Shares Are Still a Buy, by Stephen Gandel
How GoDaddy Is Helping Entrepreneurs Generate Business Ideas, by Andrew Nusca
A New Kind of AI Spots 90% of Online Abuse, by David Z. Morris
Tim Cook Will Hold a Fundraiser for Hillary Clinton, by Aaron Pressman
ONE MORE THING
Steve Case’s next big thing will come from outside Silicon Valley. AOL’s founder says the third wave of technological innovation will mean “integrating the Internet in much more seamless and pervasive ways throughout our lives.” Case discusses his new book, The Third Wave: An Entrepreneur’s Vision of the Future, in the latest episode of the “Fortune Unfiltered” podcast. Listen here.
This edition of Data Sheet was curated by Heather Clancy.