For the past two years, Sprinklr CEO Ragy Thomas as been thinking about whether to take his company public in an IPO. He’s still thinking about it, he told Business Insider at the Web Summit in Dublin today. The problem is all the other $US1 billion unicorns screwing up market expectations, he says.
In March, Sprinklr raised $US46 million in an investment round that valued the company at $US1.17 billion. Sprinklr provides social media and customer relations management services to very large companies that need them on a massive scale. For instance, companies with multiple products sold in multiple companies may have dozens or hundreds of Twitter accounts promoting those brands. Then add on all the Facebook pages, the Instagram accounts, and all the customer call center operations … it’s complicated. Some companies end up with more than 10,000 social media entities, he says. So Sprinklr sells a dashboard that can let companies manage them all from a single platform.
At the time of the last fundraising, Thomas had 700 employees. Seven months later, Sprinklr has 1,150 people. If its London office were a standalone company, its 150 staffers on their own would be one of the capital’s largest tech companies.
So Thomas is part of the unicorn club. But he’s increasingly uncomfortable inside it.
“What’s going on now actually drives me insane,” he says, in reference to some of the tech unicorns that have been valued at more than $US1 billion. “I personally know that many of those companies are way smaller than us, and growing slower than us, but have bigger valuations than us.”
The problem, he says, is that increasingly frothy company valuations of over $US1 billion have created an atmosphere in which the “sensible” thing to do is to take as much investment money as possible at the highest possible valuation. That creates pressure on Sprinklr to do the same. But in the last round, Thomas persuaded his investors to come in at lower valuation than they initially wanted.
“Our investors were willing to give us a higher valuation than we eventually agreed on and we negotiated it down, we didn’t want the valuation to go up,” he says. “We want to be able to defend our multiple. My philosophy is to raise the least amount of money that you need at a valuation based on the fundamentals. It allows you be independent of market perspectives on what’s good and bad, and whether the market is hot or cold. So if you have a way of defending your valuation, basing it revenue, on growth, it’s easier to defend and build on.”
Some unicorns, however, have valuations that appear to be unlinked to the strength of the underlying business, he says.
“I don’t know how I would be able to sleep at night if I was one of them. Some of them are truly big opportunities. But the execution risk is not factored in. The execution risk at scale is very high.”
Frustratingly, he declined to name the companies he believes are most fragile.
As for the Sprinklr IPO, that is still coming, he says. “We’re at the scale where we could have gone public this year if we wanted to,” he says. The company is now probably too big to be acquired privately by another enterprise company, he believes.
Thomas declined to specify his revenues. He says he has tripled them every year since the company began and will double them this year. “Profit is not a focus area right now because my investors in the company want to focus on growth. Cashflow is strong and we’re doubling down on growth,” he says.
“We’re headed the IPO route the question is when … the sooner we go the better it is for our initial set of public investors, to make sure they capture the upside. As you get bigger, obviously you can’t keep doubling or tripling revenue, the boat slows down. And as an investor what you care about is percentage growth.”
“On the flipside we know we’re on to probably one of the biggest opportunities available in enterprise software, so it’s a lot of foundation and fundamentals in every part of the business and … it’s easier to do without worrying about the three-monthly hurdle” of being public.
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