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The risks of Snowflake’s IPO

September 16, 2020, 2:36 PM UTC

Last valued at $12.4 billion in private funding, cloud software company Snowflake reached a $33.3 billion valuation after pricing its initial public offering late Tuesday.

Flexing the massive investor demand in the data warehousing company, Snowflake sold 28 million shares priced above range, at $120 apiece, raising nearly $3.4 billion. The pricing implied that the company held a market value above that of Twitter ($31 billion) and Airbnb (reportedly last valued at $18 billion). 

It’s not hard to see why investors are enamored: Snowflake is an enterprise tech company operating at a time when work-from-home has become the norm, in a sector that has stood staunch against the coronavirus and even experienced a boost. 

It also operates in one of the buzziest of buzzes in tech: the cloud. In that space, it’s considered the younger, more agile competitor, with the potential to capture more of the market as data warehouses shift to cloud. Meanwhile, Oracle, which has long dominated the warehouse space, is expected to move more slowly in its transformation, per my colleague Aaron Pressman.

Snowflake nearly tripled revenue in the year ending Jan. 31, pushing the figure to $264.7 million in 2020, and appears on track to double that figure again this year

Despite its massive growth, Snowflake is not without its sore points. Even as it competes with the likes of Amazon, Google, and Microsoft, the company is still dependent on infrastructure from, yes, Amazon, Google, and Microsoft. That puts Snowflake at risk if prices there rise—and if those same cloud providers decide to embed certain interoperating privileges that encourage customers to use, say, Amazon over Snowflake (which echoes, at least for me, antirrust criticism Apple is currently facing over the bundling of its products). The company acknowledged as much in its IPO filing:

“Our platform currently operates on public cloud infrastructure provided by Amazon Web Services, Microsoft Azure, and Google Cloud Platform,” the filing read. “Our costs and gross margins are significantly influenced by the prices we are able to negotiate with these public cloud providers, which in certain cases are also our competitors… 

“There is risk that one or more of these public cloud providers could use their respective control of their public clouds to embed innovations or privileged interoperating capabilities in competing products.”

Snowflake is set to debut on the NYSE as “SNOW.”

NIKOLA: After short seller Hindenburg Research published a 67-page report accusing the electric truck maker of fraud last week, regulators have gotten involved in investigating the claims. According to the Wall Street Journal, the Justice Department has joined the Securities and Exchange Commission to look into the claims regarding Nikola. Hindenburg has accused Nikola, which went public via merger with a SPAC earlier this year, of misleading investors over the progress of its technology. Nikola has refuted the report. Read more.

Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com

VENTURE DEALS

- Zwift, a Long Beach, Calif.-based global online fitness platform for cyclists and runners, raised $450 million. KKR led the round and was joined by investors including Permira, Specialized Bicycle Components’ venture capital fund, Zone 5 Ventures and the Amazon Alexa Fund.

- Dream Sports, an India-based fantasy sports company, raised $225 million. Investors included Tiger Global Management, TPG  Tech Adjacencies, ChrysCapital and Footpath Ventures. Read more.

- Acko, an India-based insurance startup, raised $60 million in its Series D funding. Munich Re led the round and was joined by investors including  Amazon, RPS Ventures and Intact Ventures.

- Devo Technology, a Cambridge, Mass.-based security analytics company, raised $60 million in Series D funding. Georgian Partners led the round and was joined by investors including Bessemer Venture Partners and Insight Partners.

- Observe.AI, a San Francisco-based company focused on contact center A.I., raised $54 million in Series B funding. Menlo Ventures led the round and was joined by investors including Next47 Ventures, and NGP Capital.

- Alloy, a New York-based identity operating system for the financial services industry, raised $40 million in Series B funding. Canapi Ventures led the round and was joined by investors including Avid Ventures and Felicis Ventures, as well as existing investors Bessemer Ventures, Primary Venture Partners, and Eniac Ventures.

- VanMoof, a Dutch e-bike brand, raised $40 million in Series B funding from Norwest Venture Partners, Felix Capital and Balderton Capital. 

- Veem, a San Francisco-based payments network, raised $31 million. Truist Ventures led the round.

- Data.World, an Austin-based cloud catalog startup, raised $26 million in funding. Tech Pioneers Fund led the round and was joined by investors including Breyer Capital, Prologis Ventures, Alumni Ventures Group, Accel cofounder Arthur Patterson, Shasta Ventures, OurCrowd, and Workday Ventures. Read more.

- RapidAI, a San Mateo, Calif.-based maker of advanced imaging for strokes, raised $25 million in Series B funding. Lennertz & Co. Family Equity Fund led the round.

- Seeqc, an Elmsford, N.Y.-based quantum computing company, raised $22.4 million in Series A funding. EQT Ventures led the round.

- Monte Carlo, a San Francisco-based company focused on reducing downtime in data, raised $16 million in Series A funding. Accel led the round and was joined by investors including GGV Capital.

- Bulletproof 360, a Seattle-based food, beverages and supplements company, raised $13 million. Investors include Beliv, Rocana Ventures, CAVU Venture Partners and Trinity Ventures

- Airmeet, a platform for virtual events, raised $12 million in Series A funding. Sequoia Capital India led the round and was joined by investors including Redpoint Ventures, Accel India, Venture Highway and Global Founders Capital.

- Varada, a Tel Aviv, Israel-based data visualization company, raised $12 million in Series A funding. MizMaa Ventures led the round and was joined by investors including Gefen Capital and existing investors Lightspeed, StageOne Ventures and F2 Venture Capital.

- CashKaro, an India-based cash back and coupon company, raised $10 million in Series B funding. Korea Investment Partners led the round and was joined by investors including Kalaari Capital. Read more.

- Dendra Systems, a New York-based ecosystem restoration company, raised $10 million in funding. Investors include At One Ventures, Airbus Ventures, Future Positive Capital, and Lowercarbon Capital.

- Signifier Medical Technologies, a London-based maker of devices for snorers, raised $10 million in Series C funding. Alan Howard, co-founder of Brevan Howard led the round.

- OnCall Health, a Toronto-based provider of virtual care software to healthcare providers, raised $6 million in Series A funding. Base10 Partners led the round and was joined by investors including Ripple Ventures, Panache Ventures, and Stout Street Capital. 

- Gravity Sketch, a London-based product design and collaboration platform, raised $3.7 million (£2.9 million) in seed funding. Kindred Capital led the round and was joined by investors including Point Nine Capital.

- Finch, a New York-based fintech service for millennials, raised $1.8 million in seed funding. Mendoza Ventures led the round and was joined by investors including Barclays, Techstars Investors, and Draper Frontier.

- Base, a New York-based at-home lab testing and digital tracking app, raised $1 million in pre-seed funding. Investors included Brooklyn Bridge Ventures, Lakehouse, AmplifyHer Ventures, and K50.

- YAPI, a Los Angeles-based software company focused on dental practices, raised an undisclosed amount of funding from M33 Growth

PRIVATE EQUITY

- TPG is in talks to buy R.M. Williams, an Australian bootmaker, from LVMH Moet Hennessy Louis Vuitton SE, per the Australian Financial Review. Read more.

- Blackstone Group and Partners Group are vying for a controlling stake in Piramal Glass, the glass packaging unit of India’s Piramal Industries, per Bloomberg. Read more.

- Provation, backed by Clearlake Capital Group, acquired ePreop, provider of SaaS solutions for surgery. Financial terms weren't disclosed.

- National Fire & Safety, a portfolio company of Highview Capital, acquired Element Fire Protection, a Phoenix-based fire safety service and inspection provider. Financial terms weren't disclosed.

- HelioCampus, backed by Pamlico Capital, acquired ABC Insights, a Chapel Hill, N.C.-based higher education benchmarking consortium. Financial terms weren't disclosed.

- Accel-KKR acquired the Shipper TMS portion of the Supply Chain Optimization software business portfolio owned by Wabtec Corporation. The business provides shipment management applications. Financial terms weren't disclosed.

- The Silverfern Group and One Equity Partners acquired American Medical Technologies, an Irvine, Calif.-based provider of post-acute care programs. Financial terms weren't disclosed.

- Liquid Environmental Solutions, backed by Audax Private Equity, acquired FloHawks, a Puyallup, Wash.-based provider of commercial and residential pumping and septic services. Financial terms weren't disclosed.

- Doxim, a portfolio company of ​​​​​​​​GI Partners, acquired Striata, a New York-based provider of customer communications management. Financial terms weren't disclosed.

- GI Partners agreed to acquire Sectigo, a Roseland, N.J.-based provider of automated digital identity management. Fitnerm.

- Warburg Pincus will invest up to $1 billion in MLM II, an information services and software platform that plans to acquire a business launched by Mason Slaine, Jay Nadler, and Karl Jaeger. 

OTHERS

- Autohome (NYSE:ATHM), a Chinese car-sales website, is preparing for a second listing in Hong Kong that could raise about $1 billion. Read more.

- ZTO Express Cayman (NYSE: ZTO), a Chinese-based express delivery company, is looking to raise as much as HK$12 billion ($1.56 billion) in a second listing in Hong Kong. 

- CB Insights acquired Blockdata, a Netherlands-based company that tracks the global blockchain economy. Financial terms weren't disclosed.

BREAKUPS AND BANKRUPTCIES

- Flywheel Sports, the operator of spin boutiques, filed for bankruptcy and is shutting down. Read more.

- Ligado Networks, a Reston, Va.-based satellite communications company, is in talks to restructure about $8 billion in debt and other obligations as it seeks to monetize its 5G-network assets, per the WSJ. Read more.

IPOs

- Unity Software, a San Francisco-based game development platform, plans to raise $1.2 billion in an offering of 25 million shares priced between $44 to $48. Sequoia Capital, Silver Lake, and JA Technologies back the firm. Read more.

- Oatly AB, the Swedish vegan food and drink maker, is considering an IPO that could value it at as much as $5 billion, per Bloomberg. Read more.

- Bentley Systems, an Exton, Pa.-based provider of software for construction projects, plans to raise $194million in an IPO of 10.8 million shares (100% insider sold) priced between $17 and $19 apiece. It posted revenue of $736.7 million and a loss of $103.1 million in 2019. Siemens Corp. backs the firm. Read more.

SPAC

- Social Capital Hedosophia is seeking to raise $500 million for its fourth blank-check company per Bloomberg. Read more.

- Equity Distribution Acquisition, a blank check company formed to to acquire an industrial business, raised $360 million. The SPAC was formed by Sam Zell's Equity Group Investments. Read more.

- Executive Network Partnering Corp., Paul Ryan’s blank check company formed in concert with Solamere Capital and Vivint Solar co-founder Alex Dunn, raised $360 million. Read more.

F+FS

- Ardian raised €2 billion for Ardian Expansion Fund V.

- Greylock raised $1 billion for its 16th fund.

- Hetz Ventures raised $77 million for its second flagship fund.

PEOPLE

- Obvious Ventures added Tina Hoang-To as a partner. 

- Petra Capital Partners added Sean Murphy as a senior associate.

- Partech hired Andrew Whiting as a Partech Growth principal and Klaudyna Augler, as a Partech Growth senior associate.