After almost a decade as a high-profile startup, data crunching specialist Cloudera (cldr) is now a public company.
Cloudera’s first day trading kicked off with a bang Friday when it’s shares rose 20% to $18.10 at the market’s close after the company priced its shares the day before. Cloudera ended up raising about $225 million from its IPO. Mike Olsen, Cloudera’s co-founder and chief strategy officer told Fortune he was “very pleased with how the markets are valuing the business.”
Tom Reilly, Cloudera’s CEO, said that Cloudera will not be “changing our business plans or operating plans” now that it’s a public company. He said Cloudera now has “more capital strength with its IPO” that “allows us to play for the long haul.”
Cloudera, founded in 2008, gained prominence by helping companies use Hadoop, a once-trendy and free technology that lets companies store and process large amounts of data across thousands of servers. Since then, however, several more open source data tools have gained steam with businesses like Spark, which lets companies crunch data more quickly.
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With so many open source data tools available, as well as the rise of machine-learning technologies to sift and find patterns in data, Cloudera has had to expand into several new data technologies—not just Hadoop.
Cloudera founder Mike Olsen said Cloudera “didn’t set out to create an open source company,” acknowledging the perception that creating a viable business based on free software is difficult. Instead, Olsen is betting that that Cloudera will grow by selling proprietary software for managing and securing data that is stored using various open-source data tools.
In its IPO, Cloudera was valued at around $1.8 billion, far less than the $4.1 billion valuation it had in 2014 as part of a $900 million funding round with Intel. The decline raised the ears of some analysts, who feared that the company may have problems.
Reilly responded by saying there’s a “difference between financial and strategic investors,” essentially arguing that Intel wasn’t out to make quick money. Cloudera’s other early investors are very happy with the company’s IPO, he claimed.
Cloudera has a close relationship with Intel, which owns a nearly 20% stake in it. For example, Intel designed its data-center chips to be more compatible with Cloudera’s software and operate more quickly, Reilly said. Olsen said that the Cloudera has a “tremendous advantage” over competitors through its relationship with Intel because it knows how to build its software to get more out of Intel’s semiconductors.
Analysts are concerned that Cloudera is spending too much money on sales and marketing relative to its sales. Cloudera spent $203 million on sales and marketing in its latest fiscal year, up 26% from the previous year.
It’s total revenue for its latest fiscal year was $261 million, a 57% year-over-year increase, while it lost $187 million during the same time period.
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Reilly said Cloudera made a “strategic decision” to spend a lot of cash on sales and marketing in order to “expand internationally.” Essentially, it’s going to take a lot of money for Cloudera to compete against its much larger competitors like AWS, and it’s unlikely that Cloudera will cut back on it anytime soon.