David Cummings on Startups

Notes from the Marketo S-1 IPO Filing

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David Cummings

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I enjoy reading S-1 IPO filings. They’re just about the nerdiest, and most honest, documents you’ll find that spill all the darkest secrets of a company (salaries, equity ownership positions, valuations at each financing round, etc). So, when I read that Marketo’s S-1 filing is finally public, I jumped right in. Marketo’s the arch-enemy of Pardot, so over the years we’d debate things like how many customers do they really have (vs claimed to have), how much were they valued at each time they raised money, etc. Well, now we know.

Here are some notes from the Market S-1 IPO filing:

  • Over 2,000 customers (pg. 1)
  • In 2011, one client paid over $324k that year – (pg. 1)
  • Revenues (pg. 1):
    2010 – $14mm
    2011 – $32.4mm
    2012 – $58.4mm
  • Losses (pg. 1):
    2010 – $11.8mm
    2011 – $22.6mm
    2012 – $34.4mm
  • Key benefits (pg. 3):
    – Drives faster revenue growth
    – Enables organizations to better build and retain long-term customer relationships
    – Streamlines the marketer’s world
    – Increases efficiency and speed of marketing execution
    – Provides deep analytical insight
  • Accumulated deficit of $82.2mm (pg. 10)
  • 79% of customers integrate with Salesforce.com (pg. 11)
  • 12.8% of revenue comes from outside the U.S. (pg. 17)
  • They define the SMB market as companies under 1,500 employees, with 80% of their customers in the SMB market (pg. 48)
  • Raised $107.1mm in financings (pg. 49)
  • Crowd Factory acquisition was for $13mm (pg. 72)
  • Five employees sold $2.5mm of their equity to a preferred shareholder in March 2012 (pg. 72)
  • Employees (pg. 96):
    Total: 339
    Research and development: 84
    Sales and marketing: 124
    Operations, customer support, and professional services: 98
    General and administrative: 30
  • Equity ownership (pg. 128):
    Venture capitalists: 85.5%
    CEO/co-founder: 6.6%
    Other co-founders: Not listed

Overall, the Marketo S-1 IPO filing is as expected and follows the Silicon Valley SaaS playbook: find a market with huge growth opportunities, burn a ton of cash to be a market leader, go public, and likely get rolled up by one of the behemoths technology companies.

The marketing automation market is enormous and Marketo is in a great position to capitalize on it.

What else? What are some other thoughts on the Marketo S-1 IPO filing?

Comments

6 responses to “Notes from the Marketo S-1 IPO Filing”

  1. Christopher Mance II (@ChrisMance) Avatar
    Christopher Mance II (@ChrisMance)

    The great thing about marketing automation is that you can measure its effectiveness. I am sure that client who spent $3.24 million that year got 10 times that value or in 2012 they were no longer a customer.

    Reply
    1. Peter Clark Avatar
      Peter Clark

      their largest customer spent ~$320k:

      “Except for a single customer in 2011 who was slightly over 1%, no single customer represented more than 1% of subscription and support revenue in 2010, 2011 or 2012”

      Revenue in 2011 was 32M

      Reply
  2. Benjamin Lazar Avatar
    Benjamin Lazar

    David, appreciate your posts. Marketo is scary; strong revenue growth but losses are insane. These guys really have no choice but to IPO or do another raise. With the cloud/Saas model, investment comes up front to build the business but having trouble seeing the financial model work. They also had to give away the farm to their several raises. Will be interesting to see how they come out… rumor on the street was Oracle was going to buy them. Sincerely, Ben

    Reply
  3. Chase Pursley (@gcpursley) Avatar
    Chase Pursley (@gcpursley)

    Wow, is this typical for a founder to retain less than 10% equity? I’ve never understood why companies like this need to go public.

    Reply
    1. Nikita Tovstoles (@NikitaTovstoles) Avatar
      Nikita Tovstoles (@NikitaTovstoles)

      Because they are currently losing money (possibly because they are investing in growth) and need inflow of lots of cash to a) operate and grow further b) provide liquidity to early investors. Someone pointed out to me that AZN and SalesForce (successfully) executed this strategy in their formative years: first get big, then get profitable.

      Reply
  4. consultiq Avatar
    consultiq

    Looks like Oracle bought Eloqua, instead.

    The losses are concerning, and it looks like a strategic decision was made to tap the public markets rather than suffer more dilution with another private round, assuming a private round could be had.

    Note also they haven’t even cleared the old rule-of-thumb revenue hurdle of $100 million per year. Is it 1999 again?

    Reply

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