With An Astounding $US6 Billion Valuation, ServiceNow Has Become 'The Next Salesforce.com'

Frank Slootman ServiceNowServiceNowFrank Slootman, CEO ServiceNow

It’s been over a year since ServiceNow’s IPO
practically saved the post-Facebook IPOmarket single-handedly.

In June 2012, with an opening share price of $US18, the company had a jaw-dropping valuation of over $US2 billion. (It was originally priced at $US17 the night before the IPO.)

And it and hadn’t even hit annual revenues of $US100 million.

Fast forward to this week: ServiceNow’s shares are trading at about $US45, giving it a nearly $US6 billion valuation.

That makes it the fifth most valuable company in Bessemer Venture Partners new “Cloud Index” that tracks the 30 biggest software-as-a-service public cloud companies.

At the time of its IPO, ServiceNow, which offers cloud apps that automate the help desk function for enterprises, was considered proof that the tech industry was in another bubble.

But, it turns out, it was proof that ServiceNow is the next Salesforce.com, CEO Frank Slootman told Business Insider.

“We’re growing into our valuation,” Slootman told us in his classic, straight-talking style. “I was told during the IPO a year ago that $US17 was a lot and now it’s at $US45. Salesforce.com is perpetually revered as an overpriced stock. And when people couldn’t get in on that in the early days, they got screwed.”

On Thursday, the company for the first time reported revenues of $US100 million in a single quarter — $US102.2 million to be precise. That’s a beat. Analysts expected $US97.4 million and an 80% year-over-year jump. It missed on profits, reporting a net loss of $US7.8 million, 6 cents per share, when analysts were looking for a 5 cents a share loss, excluding special items.

The loss is part of the plan, Slootman says.

“Essentially companies are valued on profits, but if you want to have large profits, you have to have large revenues. It’s just maths,” Slootman says. “The faster you grow, the faster you get to large profits.”

So ServiceNow is investing in growth as fast as it can, it says, trying to hire about 200 employees a quarter.

Slootman says it’s stock gives it such a big advantage when hiring talent in the tight Silicon Valley market, the company doesn’t woo employees with perks.

“We’re very much a blue-collar company. We don’t do all the lattes and back rubs and all that. My favourite perk is high-equity value,” he says.

In other words, the stock is worth so much that employees are paying off their houses and setting up big college funds.

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