By this point in late 2021, most large enterprise companies have realized they need at least a semblance of a cloud computing strategy. But getting up and running on any of the major cloud vendors is not easy, especially for companies that have been managing their own data centers for a long time.
That task is especially difficult if you want to keep your options open, whether that’s using multiple cloud providers or managing apps across cloud providers and self-managed data centers. Each cloud provider has a slightly different method for accomplishing the same goals, and learning those skills takes time.
With open-source tools like Terraform, Vault, Nomad and others, HashiCorp became one of the most valuable cloud infrastructure startups in recent years because its tools help big businesses build, deploy and managTe applications across multiple operating environments. It sells enterprise-class versions of those projects and will also manage those services for clients, which include some of the biggest companies on the planet.
HashiCorp filed its S-1 statement on Nov. 4, 2021, with plans to trade on the NYSE under the symbol “HCP.” On Nov 29 the company announced plans to offer 15.3 million shares of its common stock at between $68 and $72 per share, the midpoint of which (based on the total number of outstanding shares) would value the company at around $13 billion, more than double its current private valuation of $5.1 billion.
Like most enterprise tech companies at this stage, HashiCorp is not profitable, but it narrowed its loss during the first six months of 2021 compared to the same period last year. One of its biggest challenges will be holding onto customers as nearly everyone in enterprise infrastructure tech chases the same goal, which is why HashiCorp took great pains to emphasize its customer net-retention rate.
HashiCorp’s revenue has grown steadily since it introduced commercial products for the enterprise in 2016 to $212 million in revenue during its 2021 fiscal year.
Revenue from licensing was around $36 million for the year ending Jan. 31, 2021, almost double the previous period. For the six months ending July 31, 2021, licensing revenue totaled $22 million.
Customers also pay for support on a subscription basis, which is HashiCorp’s most lucrative business. The company recorded $166 million in support revenue in its last fiscal year (a 71% increase) and $111 million in revenue through the first six months of its current fiscal year.
HashiCorp’s managed service business is relatively new and still a small part of its business, generating $4 million in revenue during its last fiscal year. However, managed services are popular among enterprise companies that don’t have enough in-house talent to manage these complicated projects themselves, and that business is expected to grow.
A key metric for enterprise startups is net dollar retention rate, or the amount of revenue generated by existing customers in the following period. HashiCorp’s rate compares favorably to other recent enterprise IPOs: As of July 31, that rate over the last four quarters was 124%, compared to 128% at the end of July 2020.
And in a rare move, co-founder Hashimoto stepped down from his co-CTO leadership team position and seat on the board of directors just a few months before the company filed its S-1. The company said his decision to return to an individual contributor role was in the works for a long time, but founders (and major shareholders) carry a serious amount of soft moral power across their companies, which could complicate the decision-making process down the road.