Cohesity IPO, a primer

Cohesity is preparing for a potential public offering as soon as market conditions are favorable, as indicated by CEO Sanjay Poonen. The company had previously filed confidential IPO paperwork in December 2021, but market volatility due to rising inflation, interest rates, and recession fears delayed its plans.

Sanjay Poonen, previously VMware’s COO, recently strengthened Cohesity’s leadership by hiring Eric Brown as CFO and Srinivasan Murari as head of engineering. Cohesity has also expanded its partnerships with Google Cloud, Microsoft, and IBM, focusing on a new generative-AI product. This product is designed to analyze company backups for various purposes, such as summarizing emails on specific topics. Additionally, Cohesity has extended agreements with Cisco and Hewlett Packard Enterprise and reported a 29% annual revenue growth in 2022, according to IDC data.

In March 2021, Cohesity was valued at $3.7 billion in a secondary market sale, with ambitions for a significantly higher valuation at its public debut. The company has raised $672.3 million in total venture capital funding, with the latest round being $250 million in April 2020.

Poonen emphasizes the importance of profitability, particularly positive free cash flow, in the current market environment. This focus marks a shift from the previous emphasis on rapid growth, aligning with more traditional business fundamentals. Cohesity’s approach includes maintaining operational efficiency, as evidenced by layoffs as recently as June and a current full-time employee count of 2,100.

Poonen’s strategy reflects a broader industry trend where companies are increasingly prioritizing financial sustainability alongside growth, especially considering the recent market downturns. This shift might influence investor expectations for tech companies planning to go public in the near future.

Cohesity Competitors

Cohesity faces competition from several key players in the data management and storage industry. Its notable competitors include Commvault, Veeam Software, DataCore Software, FalconStor Software, Rubrik (click here to learn about the Rubrik IPO), and Veritas Technologies. These companies offer a range of solutions in data protection, cloud data management, data storage, and virtualization. Each of these competitors brings unique strengths and market presence to the table, contributing to a diverse and competitive landscape in the industry. For example, Commvault is known for its data protection platform, while Veeam Software specializes in cloud data management solutions. Rubrik, similar to Cohesity, develops cloud data management and enterprise backup software. These companies collectively represent a significant portion of the market, challenging Cohesity in various aspects of data management and protection​​.

2023 Tech IPO atmosphere

If and when Cohesity has an IPO, the environment around it will likely be improving from a slow post-Covid atmosphere.

The IPO environment for tech companies in 2023 has been a mixed landscape, characterized by cautious optimism and ongoing challenges. In the first half of the year, IPO activity remained slow compared to previous bull markets, but there were signs of improvement over the previous year. Several large deals drove an uptick in U.S. IPO activity, with a few IPOs raising significant funds. This included a single $4.4 billion IPO in May, which accounted for over 40% of total U.S. IPO proceeds for the year to date. This offering was notable as the largest U.S. IPO since November 2021 and traded up 22.3% on its first day​​.

In the third quarter of 2023, the IPO market showed some hopeful signs. Three IPOs each raised over $500 million, including one that was among the nine largest IPOs in the last 20 years. However, the market has not yet fully rebounded as many were hoping. Recent IPOs have been characterized by selective investor interest, with issuers needing to de-risk transactions through various measures like extensive pre-marketing, cornerstone investments, and smaller transaction sizes. The overall sentiment remains cautious due to an uneasy macroeconomic and political landscape. For the IPO market to normalize, it’s critical for the first wave of IPOs to come to market at reasonable valuations and trade well​​.

Some tech startups tested the IPO waters in 2023, pushing up valuations. Notable tech IPOs included Nextracker Inc. and Arm Ltd., both of which saw significant interest and successful debuts. However, the tech IPO activity in 2023 was not at the level of the 2021 bull run, and some tech companies, like Reddit and Stripe, delayed their IPOs due to market conditions. The IPO environment for tech companies continues to evolve, with factors like inflation, interest rates, and market volatility playing crucial roles​​.

The overall trend in 2023 shows that while the IPO market is experiencing some revival, it remains selective and challenging. Companies considering an IPO need to be well-prepared, demonstrating strong growth prospects and a clear path to profitability to attract investor interest. As the market conditions improve, including moderating inflation and interest rates potentially stabilizing, there is cautious optimism for a more robust IPO market in the near future. However, the unpredictable nature of the market suggests that companies need to be ready to seize opportunities as they arise.