In wandering around the Internet as I follow interesting companies, I noticed some action with AppDynamics. AppDynamics is an intelligent application performance monitoring company. Check more here. Their total funding as of date is 350M+. More details here. They just filed an S-1 on December 28th, 2016. See here.
The company highlights are as follows:
This Raises Some Questions and Thoughts
The cash flow from operations (CFO) for the 9 months ending Oct 31 2016 was only negative 2.2M USD. Can that be improved? CFO in the last quarter of 2016( Oct 31 2015 - Jan 31 2016) was 7M+. Is the company approaching positive cash flows?
How much of the current $12B TAM can AppDynamics capture? There is already plenty of competition including New Relic, which went public a couple of years back. They aren’t profitable either.
The Sales & Marketing (S&M) spend seems high. S&M spend is $118M for 9 months ending Oct 31st 2016 while Revenue increased only 56M during the period over the corresponding 9 months in 2015. Is this just “landing” in the “land and expand” strategy?
The S-1 takes this concern head on by stating:
“ Investments we make in our sales capacity will occur in advance of any return on such investments, making it difficult for us to determine if we are efficiently allocating our resources in these areas”.
New Relic ended the first half of the year with 122M in revenue whereas AppDynamics finished the last 9 months with 158M in revenue. New Relic as of Jan 6th had 1.6B in market cap and had been as high as 2B a few months back. What should AppDynamics valuation be? It last raised capital at 1.9B valuation.
To sum it up, this will be a closely watched IPO in the tech industry, especially after a lackluster 2016.