Notes from the Splunk S1 IPO Filing

Splunk, a distributed machine data indexing and monitoring application for IT departments, just filed their S-1 IPO paperwork to go public. The IPO process is fascinating, especially the detail with which companies explain their last three years in the S-1 filing. S-1 filings are some of the most detailed, factual information you can read about startups that have achieved strong economies of scale.

For Splunk’s business model, you can think of it as traditional enterprise middleware software for storing, searching, and monitoring all the log files generated by applications. Software applications, especially web-apps in the cloud, are increasingly distributed across multiple servers making log file analysis very difficult. Splunk solves this problem and many others. It’s a Paul Graham Schlep Blindness business.

Here are notes from Splunk’s S-1 IPO filing:

• 3,300 customers as of October 31, 2011 (pg 2)
• Revenues (pg 2)
  2009 – $18.2M
  2010 – $35.0M
  2011 – $66.2M
• Key Benefits (pg 4)
  Real-time operational intelligence and visibility
  Compelling return on investment and lower total cost of ownership
  Fast time to value
  Ease of use
  Highly scalable and flexible data engine
  Open, extensible platform
• Growth Strategy (p4)
  R&D investment
  Sales investment
  Up-sell existing customers
  Build related products
  Grow user and developer community
  Become platform for machine data
• Perpetual license agreements most common (pg 12)
• More than 70% of revenues recognized each quarter in 2011 were deals sold that same quarter (pg 12)
• As of October 31, 2011, nearly half the employees have been with the company less than one year (pg 13)
• Net Losses (pg 14)
  2009 – $14.8M
  2010 – $7.5M
  2011 –  $3.8M
• Accumulated deficit of $52.7M as of October 31, 2011 (pg 14)
• 21% of revenues are from outside the United States in 2011 (pg 17)
• Splunk is a NetSuite and Salesforce.com customer (pg 21)
• Sales and marketing offices in Hong Kong, Germany, Singapore, and United Kingdom (pg 47)
• Splunk is a traditional enterprise software vendor and does not have a cloud/SaaS model (pg 47)
• Professional services represent 6% of revenue (pg 47)
• 188 orders of $100,000+ in first nine months of fiscal 2012 (pg 50)
• $3M term loan from Silicon Valley Bank (pg 60)
• Equity Ownership Stakes (pg 121)
  Venture capital firms owns 71.5%
  Hired CEO owns 8.1%
  Co-founders own 6.0% and 5.7%

Overall there were no surprises and everything was representative of a fast-growing traditional enterprise software company. Traditional enterprise software companies are valued around 2-3x revenues, so I expect Splunk to trade at 4-6x revenues due to the high growth rate.

What else? What are your thoughts on the Splunk S-1 IPO filing?