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The danger of going public in 2020

The danger of going public in 2020

Good morning! This Tuesday, we've put together a special edition, with a close look at yesterday's ream of S-1s, the problems facing tech companies looking to IPO right now and who might go public next. Also: Elon Musk's new plane.

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The Big Story

The best of the (many) S-1s

We thought it would be the week of the S-1, and yikes were we right. And you know what that means: time to dive into some Risk Factors! (Which are, in case you're not an S-1 aficionado because you have much better things to do with your life, an almost-public company's laundry list of all the things that could go wrong. They say more about the state of the tech industry than just about anything else you'll find.)

All the companies that filed S-1s yesterday lose money, all have nerves about the pandemic-based future, and all know that if they don't do a good job they'll be in trouble. But each one has its own challenges, too.

First up, Snowflake, the cloud database company:

  • You know how everybody loves SaaS because revenue is super reliable and comes in every quarter on the dot? Snowflake's not like that: "Unlike a subscription-based business model, in which revenue is recognized ratably over the term of the subscription, we generally recognize revenue on consumption." That makes it hard to forecast.
  • Snowflake's product is available on AWS, Google Cloud and Azure ... which are also some of its main competitors. Those companies could change their prices, policies and products, and hurt Snowflake in a big way.
  • A full 11% of Snowflake's revenue in the fiscal year ended Jan. 31, 2020 came from one client: Capital One. "We must expand our sales and marketing organization to increase our sales to new and existing customers," the S-1 says.

Next, Unity, the game-engine company:

  • Unity has obviously been watching what's happening between Epic (its main competitor) and Apple, with a passive-aggressive warning that it could be kicked out of app stores: "In some cases these requirements may not be clear ... which could lead to inconsistent enforcement of these terms of service or policies against us or our customers."
  • It's also worried about increased privacy rules, and how less data-collection would harm its businesses: "Restrictions in our ability to collect and use data as desired could negatively impact our Operate Solutions as well as our resource planning and feature development planning for our software."
  • The company wants to hit more industries and be accessible to more people, but knows both will be hard: "If we do not succeed in maintaining and broadening the accessibility of our platform, or if competitors develop and introduce products that are easier to use than ours, our ability to increase adoption of our platform will suffer."

Now Asana, the project management company:

  • Asana warned that even with all its recent growth, it's in a winner-take-most market that ... doesn't have a winner yet: "Widespread acceptance and use of our platform is critical to our future growth and success."
  • Its list of competitors is long: Microsoft, Google, Atlassian, Smartsheet,, and even "solutions related to email, messaging, and spreadsheets."
  • Asana's worried about the App Store, but also Google Search: "The number of users we attract to our website from search engines is due in large part to how and where our website ranks in unpaid search results. These rankings can be affected by a number of factors, many of which are not in our direct control."

And Amwell, the telehealth company:

  • Amwell makes clear that betting on it is betting on telehealth, which is still new and unproven. "Negative publicity concerning our services or the telehealth market as a whole could limit market acceptance of our services."
  • There are a lot of telehealth startups, but the bigger risk may come from large health care companies getting into the space. "The surge in interest in telehealth, and in particular the relaxation of HIPAA privacy and security requirements, has also attracted new competition from providers who utilize consumer-grade video conferencing platforms."
  • Also, this is what life in a heavily regulated industry looks like: An S-1 with more than a dozen pages of compliance, regulatory uncertainty and possible legal challenges.

Finally, there's JFrog, the devops company:

  • One of JFrog's main products has an open-source version, which the company notes might hurt its proprietary version: "It could reduce the demand for our products and put pricing pressure on our subscriptions."
  • It makes a number of products, so it has a long list of competitors, including some heavy hitters: IBM, Pivotal, VMware, Google, Amazon, Microsoft, GitLab and Sonatype are all named in the S-1.
  • The company's also worried about what going public might do to corporate culture: "It could lead to disparities of wealth among our employees that could adversely affect relations among employees and our culture in general."

Just kidding! There's actually one more. Sumo Logic, the data analysis company:

  • Sumo Logic has the longest AWS section of anybody, because effectively without AWS there's no Sumo Logic: "Our customers need to be able to access our platform at any time, without interruption or degradation of performance. Our platform depends, in part, on the virtual cloud infrastructure hosted in AWS."
  • The company has big international plans, but those might be complicated. It offers 18 reasons things could go wrong, and that doesn't even include "a bunch of countries might suddenly ban us."
  • Acquisitions are hard, and Sumo plans to do a lot of them: "The pursuit of potential acquisitions may divert the attention of management and cause us to incur significant expenses related to identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated."

More IPOs

What to learn from the S-1s

The most striking thing to me, reading over Monday's six S-1s, is the never quite explicitly stated fact about the technology industry: That everybody in tech is either competing with the giants, relying on them for some critical part of their business, or both.

  • Google's SEO changes, Apple's App Store policies, and Amazon's AWS functionality are all unavoidably important to these companies. And they all live in fear that one of those companies will someday decide to compete with them.
  • And as the tech world gets more interconnected, through integrations and APIs and open-source software and who knows what else, it also becomes more interdependent. Very few tech companies control their own destiny entirely anymore.

There's always a lot of human drama in these S-1s, and some interesting business tidbits. And some parts where the two overlap! Here are a few:

  • Snowflake CEO Frank Slootman got an options grant worth nearly $60 million last year, making him by far the highest-paid executive at any of these six companies. Highest base salary? Amwell's co-CEOs, Ido and Roy Schoenberg, at $650,000 apiece.
  • Remember last year, when Unity CEO John Riccitiello was accused of sexual harassment, and it turned into an even bigger issue when it became clear he was dating the head of HR? Well, when she left the company last November, it cost Unity $13.5 million.
  • Cedric Dageville, son of Snowflake President of Product Benoit Dageville and an account executive at the company, managed to more than 12x his salary — from $10,260 to $126,298 — in two years. Pretty good trajectory, that one.
  • Unity noted that it lost revenue earlier this year due to "retirement of certain partners' product offerings" in AR/VR. I'm guessing that's related to the Oculus Go shutdown, but what do you think?

It's also clear that every tech company needs to continue to make COVID-related plans, because the fallout from the pandemic is likely to last much longer than the pandemic itself. Whether it's adapting to remote work, rethinking business models, or just trying to figure out what's going to stick when everyone goes back to the office, every CEO should be making all-case-scenario plans for what the world looks like a year or two from now.

  • Honestly, every company should rewrite its own Risk Factors from time to time. It's clarifying to see, sometimes in hilariously pedantic detail, everything that could imaginably go wrong.

Who's Next

Next up on the IPO docket, it's …

Oh, you thought that was it for the fall? Not even close. Ant Group filed this morning to go public in Hong Kong and Shanghai, reportedly seeking a $225 billion valuation. And we're still waiting to hear more from Palantir and Airbnb, who should both have more information out soon.

As for who might be next to drop, I have a few guesses:

  • DoorDash seems like a good bet. It filed an S-1 earlier this year, but then the pandemic screwed that up pretty badly. It's reportedly back on for November or December.
  • Procore also filed an S-1 earlier this year, but pulled that back to raise more private money.
  • ThredUp's planning an IPO, Bloomberg reported, but not until early next year. Poshmark was supposed to IPO this year, but we haven't heard much about that recently.
  • GitLab once set a date for its IPO: Nov. 18, 2020. But it has since removed that date from its website, so I wouldn't count on it.
  • Compass, the real-estate company, has been rumored to be on the verge of an IPO for the better part of two years. It's had a rough 2020, and Protocol's Biz Carson is totally against me putting Compass on this list, but with the housing market rebounding in a big way the last few months, you never know.
  • Here's one Biz did like: "Every autonomous vehicle company, via a SPAC. All of them." Luminar, the autonomous-vehicle company, already announced plans to go public through a SPAC later this year.
  • "And if you're going for my dark horse bet," Biz told me, "I'll take WeWork with a SPAC as the ultimate 2020 IPO. It's just wild enough to come true."

Join us tomorrow


Join us Wednesday at noon ET for the second event in our National Political Conventions series 'Building the Future'. This event series is hosted in partnership with ITI.

RSVP here.

People Are Talking

Judge Yvonne Gonzalez Rogers said Apple can keep Fortnite out the App Store, but can't currently take further action against Epic's Unreal Engine. Her long-term prognosis doesn't look good for Epic, though:

  • "Based on a review of the current limited record before the Court, the Court cannot conclude that Epic has met the high burden of demonstrating a likelihood of success on the merits, especially in the antitrust context."
  • She also muted Apple lawyer Richard Doren during the Zoom hearing, which is perhaps the ultimate 2020 power move.

Developers are watching this fight and are worried about a future where they rely on the App Store, one studio executive said:

  • "If that's your bread and butter, you're potentially completely out in the cold. You just don't want to put a target on yourself."

Arm founder Hermann Hauser really doesn't want Nvidia to buy Arm, saying it's unacceptable for a European company to be under CFIUS regulations:

  • "Whether we are allowed to use our own British-designed microprocessors in the U.K. and Europe will be decided in the White House rather than in Downing Street."

We're all spending way too much time in front of screens, but Jaron Lanier said it's in a slightly better way than it used to be:

  • "I think people are spending more time in a self-directed way by connecting with others on video chat or things like that than they are passively receiving a feed. And so I actually think things have gotten a little better."

Making Moves

Lila Snyder is the new CEO of Bose. She was previously running ecommerce at Pitney Bowes, and will be the company's first female CEO.

Kamal Hathi is DocuSign's new CTO. He joins from Trader Interactive, and has also worked at Microsoft.

In Other News

  • On Protocol: Apple acquired VR startup Spaces, which was spun out from DreamWorks as a location-based VR experiences company before pivoting to video-conferencing during the pandemic.
  • Foxconn is considering making iPhones in Mexico, reports Reuters. Both it and competitor Pegatron are reportedly planning new factories in the region, which increasingly looks like the hot new spot for tech manufacturing.
  • Facebook is still struggling with gun sales. The Wall Street Journal reports that people are selling guns disguised as gun logo stickers. When Protocol reported on something similar back in February, a group of senators demanded answers — expect similar this time.
  • On Protocol: TikTok sued the Trump administration, claiming it violated due process, misused the International Emergency Economic Powers Act, and rushed its national security investigation for political reasons. It said it wants a preliminary injunction on the TikTok ban by September 20.
  • Speaking of TikTok: General Atlantic and Sequoia reportedly like Oracle's bid more than Microsoft's, because Oracle would let them keep a stake in the company.
  • Triller signed a deal with JioSaavn, Reliance's music streaming app. Triller videos will start appearing in JioSaavn, and users will be able to create Triller videos from JioSaavn. Sounds like Jio probably won't invest in TikTok India after all, then?
  • Cheap Chinese smartphones might be cheap for a reason: BuzzFeed found that some Transsion phones come with money-stealing malware, which isn't a great look for Africa's top smartphone brand.
  • Don't miss this article about Larry Ellison's philanthropy efforts, which Recode describes as "a case study of the shortcomings, loopholes, and lack of accountability that define Big Philanthropy."
  • Zoom went down yesterday morning … just as a bunch of schools started online classes. Zoom days are the new snow days, kids.

One More Thing

Elon Musk's new plane

Sometimes, one plane just isn't enough, you know? It looks like Elon Musk recently took ownership of a 2008 Gulfstream G550, for what we're hearing is about $14.3 million. It's registered to Falcon Landing LLC, which has the same address as SpaceX's headquarters, but it seems to be for Musk himself. (Though Tesla reportedly foots the bill for most of his travels.) He's been shopping for at least two years, and evidently finally found his plane. I'm guessing it wasn't the Matterhorn White exterior or the Rolls-Royce engines, but the built-in printer that sold him. For a guy who flies as much as 150,000 miles a year, maybe one plane really doesn't suffice. That, or little X Æ A-12 is about ready to start hitting the skies.

Join us tomorrow


Join us Wednesday at noon ET for the second event in our National Political Conventions series 'Building the Future'. This event series is hosted in partnership with ITI.

RSVP here.

Today's Source Code was written by David Pierce, with help from Shakeel Hashim. Thoughts, questions, tips? Send them to, or our tips line, Enjoy your day, see you tomorrow.

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