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Enterprise Software

Rubrik’s IPO: Evaluating the Potential of a Microsoft-Backed SaaS Player in Data Security

Rubrik’s IPO is priced at $32 per share. Microsoft is backing this company.

SaaS business – data and data-centric security – this is a growing business with overall industry growth in the low twenties, from migration of on-prem to cloud.

Co-founder is Ex Nutanix

Company-wide revenue growth was only 5%, and the company is still in an early growth stage to have decent profitability but has shown a lot of promise with declining losses last year. Sales and marketing expenses take away a lot of revenue – they’ll need to keep this high to convert pure license customers to SaaS customers, at least 2-3 years.

Net Retention Rate at 133% is good for SaaS customers but this number drops over total revenue because of the large license revenue base.

A lot of big competitors in this industry, including Dell EMC and IBM.

Overall, given the slowing revenue growth, I would prefer to wait. I suspect the valuation is coming in too hot at an estimated 8x sales without the growth. Let’s keep an eye out, it has promise but I think we’ll need a better price.