Confluent, Backed By LinkedIn, Files S-1 As Annual Sales Surpass $ 300 Million

Confluent, Backed By LinkedIn, Files S-1 As Annual Sales Surpass $ 300 Million

Seven years after the exit of LinkedIn, cloud software developer Confluent goes public.

Confluent, which sells software that developers can use to quickly move data for use in applications, has filed its IPO prospectus Tuesday, seeking to become the latest company to transition from an open source project to a multi-billion dollar public company.

First-quarter revenue jumped 51% from a year ago to $ 77 million, with most of its sales coming from subscriptions. The company’s rental loss widened to $ 44.5 million from $ 33.6 million, as selling and marketing costs jumped.

At the heart of Confluent’s software is Apache Kafka, which got its start at LinkedIn. The founders of Confluent – Jay Kreps, Jun Rao and Neha Narkhede – created Kafka in 2011 and then formed Confluent in 2014 with a investment of approximately $ 500,000 from LinkedIn. The company was recently valued at $ 4.5 billion in a funding round conducted last year by Coatue Management and Altimeter Capital.

“We deployed it on a large scale for early use cases on LinkedIn, handling data feeds with billions of posts,” Kreps, CEO of Confluent, wrote in a letter in the prospectus. “But even then our ambition was greater. Kafka was designed to be open source, and we wanted it to do more than serve as a use case in an enterprise.”

Before Confluent, Cloudera and Hortonworks gained momentum by marketing Apache Hadoop, which originated from internet companies such as Facebook, Google and Yahoo. Hortonworks derived from yahoo and merged with Cloudera in 2019.

As independent companies and then as a combined entity, Cloudera and Hortonworks struggled to find a viable business model. Earlier Tuesday, Cloudera agreed to sell to private equity firms in a $ 5.3 billion deal.

In the area of ​​on-premise software, Confluent said that Cloudera has some competition, as well as IBM and Oracle. However, its core business is with large cloud infrastructure providers. Amazon, Microsoft and Google, all of which also have competitive offers of some sort.

Confluent had $ 167 million in non-cancellable purchase obligations, mostly related to cloud deals, at the end of 2020. The company earned 18% of its revenue from its cloud service in the first quarter, up from 12% in the last quarter. quarter of the previous year. .

Confluent, which has nearly 1,500 employees, said in its prospectus that more than 70% of Fortune 500 companies have used Kafka. Its clients include Citigroup, Human, Intel and Walmart, according to the Confluent website.

Confluent said it offers a traditional license to customers and also has a community license for its software that provides access to its source code. The company said it “explicitly prevents others, including cloud providers, from taking this source code and using it to come up with a competing software as a service, or SaaS offering.” Amazon introduced a service based on Kafka in 2018.

Morgan Stanley, JPMorgan Chase and Goldman Sachs are the main underwriters of the IPO. The stock will be listed on the Nasdaq under the symbol “CFLT”.

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