Snowflake: IPO That Made Salesforce and Warren Buffett Bullish

(Editor’s note: This article by Jiri Kram was originally published on LinkedIn on Sept. 10. Jiri has published several articles here at Cloud Wars over the past six months, and as with all of his other insightful and compelling pieces, this article reflects Jiri’s informed views and does not necessarily reflect the views of Cloud Wars. In this piece, Jiri explores the likely ramifications of the much-anticipated IPO for Snowflake and the parts to be played in that event by investors Salesforce and Warren Buffett. Jiri’s most-recent Cloud Wars article, called Can Salesforce Become the Next Trillion-Dollar Company?, touches on some related themes and was published Sept. 5. A solution architect who studied FinTech at MIT and has a particular emphasis on ML and blockchain, Jiri has worked with Salesforce technology for many years.)

There were various milestone years in enterprise IPO history: 1986, 2004 and 2012. I believe the year 2020 will be remembered the same as those key dates.

The Robin Hood of Omaha?

Did Warren Buffett suddenly become the Robin Hood of Omaha instead of the Oracle of Omaha? Unlikely! When you are 90 years old, you will not make foolish bets with your money. It could tarnish your reputation and your legacy. So why is the most famous investor in the world, Warren Buffett, taking a $570M stake in a start-up? And why is Salesforce investing an additional $250M in a company you might never have heard about? Here is my take why Warren Buffet, Marc Benioff and I are all bullish about Snowflake.

Short history lesson 

• March 12, 1986 – Oracle $ORCL (IPO price: $0.067, today: $55.73)
• March 13, 1986 – Microsoft $MSFT (IPO price: $0.089, today: $ 214.25)
• June 23, 2004 – Salesforce $CRM (IPO price: $3.95, today: $254.70)
• June 29, 2012 – ServiceNow $NOW (IPO price: $23.70, today: $487.41)

Will the year 2020 add another name in that list?

Play it again Frank 

• June 27, 2007: a man from Rotterdam is launching his first IPO
• July 8, 2009: his company Data Domain is acquired for $2.4 billion by Dell EMC
• June 29, 2012: a man from Rotterdam is launching his second IPO
• September 8, 2020: that company, ServiceNow, is now valued $86.38 billion
• Unspecified-date, 2020: a man from Rotterdam is launching his third IPO

Do you believe Snowflake will be the smallest of all? I don’t!  Here is why:

Snowflake is going to be one of the biggest tech IPOs in history

1. Snowflake TAM is far bigger than any previous firm Frank took to IPO
2. Snowflake disrupts the market dominated by Oracle, Microsoft, IBM…etc.
3. Snowflake is designed for the multi-cloud world
4. Snowflake is a primary acquisition target for almost every cloud vendor
5. Snowflake can become as big as Oracle (if not stopped by acquisition)
6. Snowflake complements SaaS applications like Salesforce, ServiceNow…etc
7. Snowflake has a technology advantage that will be further expanded
8. Snowflake has a favourable economic model making it hedge against vendor lock
9. Snowflake works with all major clouds: AWS, Azure, GCP and Salesforce.
10. Snowflake integrates to many data platforms Informatica, Tableau, Power BI, etc

And it’s just a start.

What is the future of Snowflake?

There are only three most probable options:

1. Snowflake is acquired by Salesforce, Oracle, Microsoft, Google, Amazon or IBM.
2. Snowflake will become high-flier like ServiceNow, DocuSign, Okta, Veeva…etc
3. Snowflake will outgrow competitors and will become as acquisitive as Salesforce

Conclusion 

In 1986, I couldn’t invest in Oracle and Microsoft IPOs; I was too young. 

In 2004, I missed the Salesforce IPO as I had no experience in investing. 

In 2012, I didn’t invest in ServiceNow because I didn’t know how to evaluate companies.

But in 2020, I will not miss the Snowflake IPO.

(Author’s disclosure: I am long in companies mentioned CRM, MSFT, AMZN, ORCL and NOW. I intend to purchase SNOW shares when these become available. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it.)

(Additional disclosure: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock, you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.)

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