Datadog gets ready to IPO

Author: Lindsey Boycott

Estimated read time: 4 minutes

Publication date: 2nd Sep 2019 15:30 GMT+1

It sounds like Bits will soon be running with the publicly-traded big dogs and like many of the IT firms that have IPO’d in recent months, his company may join the ranks of billion-dollar tech startups that have debuted this year. Bits, of course, is the mascot for New York-based Datadog, a cloud application monitoring company who filed its S-1 with the Securities Exchange Commission on Friday.

Founded by Olivier Pomel and Alexis Lê-Quôc in 2010, Datadog offers a SaaS-based (software-as-a-service) monitoring service that gives developers greater visibility into what’s happening with their web and mobile applications infrastructure management capabilities and network systems oversight. In a 2018 interview with SaaStr, Pomel shared his experiences with getting his company started in New York. He also spoke about their process of defining the problem before building the product.

“We were based in New York, which is not the obvious place to start an infrastructure company,” Pomel said. “Most of the companies in the US started in that space were in the Bay area. Neither my co-founder or myself came from Google or Facebook so we didn’t have the credentials for helping companies run at very large scale.”

“So, basically, we didn’t have millions and millions of dollars, we didn’t have a whole suite of people that were repeating to us that we were geniuses so they could invest in our company. So, we basically had to focus on the problem, like we spent really the first couple of years of the company listening to customers and trying to understand what the problem was,” he added.

They are a leading vendor in the niche market of application performance monitoring (APM) tools and claim a roster of over 8,000 clients. The firm has almost doubled their income from $100.8 million in 2017 to $198.1 million in 2018 and, according to their S-1, are just getting started. Datadog believes that the APM market opportunity lies in the $35 billion range: “Companies across all industries are re-platforming their businesses to cloud infrastructures,” the SEC filing reads. “We believe that we are currently underpenetrated in our existing customer base.”

Like many of 2019 tech IPO offerings, Datadog is a fast-growing company in a high-flying business. What separates them out from the other guys is even with their impressive earnings, they are not hemorrhaging out in overhead costs. They posted a $13.7 million operating loss in the first half of 2019 but when compared with their $153.3 million in top-line growth from the same period, the numbers compare favorably to other tech startups on a similar trajectory.

The company has raised a total $147.9 million in equity gathered over six rounds of funding and their most recent valuation from 2015 places them at $640 million. Application performance monitoring companies have commanded top prices in recent weeks, like Datadog competitor SignalFx who announced Wednesday that they had been acquired by Splunk for $1.05 billion. Earlier this month, cloud-management company Dynatrace enjoyed similar success as stocks soared 49 percent on their first day of trading.

The firm has hired Morgan Stanley, Goldman Sachs, JPMorgan Chase & Co and Credit Suisse Group AG as the lead underwriting banks for the IPO – which could come later this year, people familiar with the matter said.

Sources:

https://www.datadoghq.com/blog/datadog-is-now-datadoge/

https://www.forbes.com/sites/monicamelton/2019/08/23/datadog-joins-pack-of-cloud-ipos/#20fc3fb61242

https://news.crunchbase.com/news/datadog-files-to-go-public-with-quick-revenue-growth-slim-losses-and-history-of-profitability/

https://en.wikipedia.org/wiki/Datadog

https://www.saastr.com/how-to-build-and-sell-a-product-that-customers-love-video-transcript/

https://www.reuters.com/article/us-datadog-ipo-idUSKCN1UL23F


Disclaimer: Lindsey Boycott is an experienced financial consultant who writes for Finscreener.com. The observations she makes are her own and are not intended as investment or trading advice.