Silicon Valley may be in the center of a whirling political maelstrom surrounding how today’s leading tech companies use their customer’s data, but that’s not stopping executives at Smartsheet from going public. The Seattle-area tech company is aiming to raise $100 million in its market debut, which could make it one of the most highly-watched IPOs of a year that’s thus far been defined by impressive tech companies going public.
Here are the hidden details of Smartsheet’s upcoming IPO, and what tech investors need to be aware of before throwing their financial heft behind the company.
The world isn’t happy with Silicon Valley
It goes without saying that consumers right now are upset at Silicon Valley executives preaching about changing the world; companies like Facebook (NASDAQ:FB) and Google are suffering from absolutely brutal headlines and media coverage revolving around the way they secretly leverage their users’ data, and it seems like the intense scrutiny surrounding tech companies right now isn’t going away anytime soon. Given the ongoing tech furor, many tech investors are shying away from the market, which could be a huge mistake, given the waves Smartsheet is soon to generate when it debuts on the New York Stock Exchange.
Smartsheet (NYSE: SMAR) will likely be flying under the radar when it comes to consumer outrage; the company is a cloud-based platform aiming to help businesses optimize their digital operations, not a social media brand, meaning it won’t suffer from any embarrassing user data-fueled fiascos anytime soon. Indeed, up to this point, Smartsheet has built quite a positive reputation for itself; the company has some 3.6 million happy users around the globe, and has ingratiated itself with Fortune 100 companies, some 90% of which use Smartsheet’s services in some form.
Smartsheet may also lure in some investors with its promising revenue growth; the company has seen its revenue swell by sizable figures in recent years, leaping from some $40.8 million in 2016 to a hefty $111.3 million in fiscal year 2018. Still, sizable revenue gains haven’t been able to offset the company’s consistent losses; Smartsheet has been losing more and more money as of late, having posted losses of $14.3 million in 2016 that swelled to more than $49 million in fiscal year 2018. Such dismal net losses like that will give many tech investors reason to pause before deciding to back Smartsheet.
Financial figures aren’t the only thing on investors’ minds, either. The company’s prospectus, filed with the SEC, also gives plenty of reasons to worry about its future; Smartsheet will be competing against established tech monsters like Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL), which can doubtlessly pour untold millions into the development of services that will aim to steal away some of Smartsheet’s users. The company has already sparked Amazon’s ire by poaching one of its executives, which ignited a legal battle that Smartsheet eventually won.
Clearly, Smartsheet has the zeal needed to compete against established tech monopolies in today’s market, but is that enough for the company’s future on the market?
Smartsheet’s unknown future
If Smartsheet hopes to be anything more than a briefly-watched IPO on the NYSE, it needs to make some structural changes to how it operates to win over more investors. The company has already pledged to use the profits from its IPO, which could reap it in more than $100 million, to optimize its existing staff structure and better invest in its future. Still, investors will want to see concrete results if they’re throwing their money behind Smartsheet, and will likely harp its executives until net losses are seriously trimmed down. Competitors like Asana and Workfront, not to mention huge tech names like Alphabet, will soon be breathing down the Smartsheet’s neck if the company doesn’t get out of the red.
Smartsheet’s impressive valuation could instill some confidence in investors that it has the immense financial capital it needs to stay up to date and competitive; after all, the company was privately valued at more than $800 million in the past, and has successfully reaped in tens of millions of dollars before through venture capital funding. If Smartsheet’s IPO is a success, there will be little reason to doubt that the company has all the money it needs to continue bringing impressive services to the market. With major Fortune 100 companies like Starbucks (NASDAQ:SBUX) relying on Smartsheet to provide the services they need to effectively manage their businesses in today’s digital economy coupled with the massive amount of money Smartsheet is sure to raise from its IPO, it’s hard to see the company struggling in the near-future. Investors should keep Smartsheet’s consistent history of posting net-losses in mind before they throw their money behind it, however, as growing revenue figures mean little to those analysts concerned who see them overshadowed by rising costs of doing business.