This blog will discuss eight things about the Snowflake IPO

Snowflake has the most extensive and expensive software IPO in history, and this skyrocketed further for an evaluation of 70 billion dollars.

What is crazy is that Snowflake is losing money year after year.  Yes, they have yet to have a single quarter of profitability.

This article will talk about the eight things Snowflake understands exceptionally well:

  1. Advertising in the computer industry pays off year after year.
  2. The capabilities of scaling compute and storage on public clouds.
  3. Customer retention is gold in the computer industry.
  4. High-powered investors are critical.
  5. Who are the biggest losers in the IPO?
  6. Sharing data between customers and providers is revolutionary.
  7. Standard SQL that makes migration of applications easy is essential.
  8. Hiring a proven CEO can make all of the difference.

1) Advertising in the computer industry pays off year after year.

If you are in the automobile industry and spend 1,000,000 dollars on advertising and make 2,000,000 dollars, you have profited by 1,000,000 dollars.  If you pay nothing on advertising and marketing the next year, you will make less than 100,000 dollars because you will probably earn some maintenance fees for the cars you sold last year.

If Snowflake spends 1,000,000 dollars on advertising and makes 2,000,000 dollars, they also profit by 1,000,000 dollars.  If Snowflake pays nothing on marketing and advertising the next year, they will make about 1,500,000 dollars because the same customers return and pay the same fees they did the year before, plus some.

2) The capabilities of scaling compute and storage on public clouds.

The Snowflake architecture allows customers scalable and separate storage and compute.  You can spin-up nodes for computing power (CPU and Memory), and you have separate disk storage (i.e., S3 on AWS).  You can even scale up to hundreds of computing nodes to load a five billion row table in minutes and then scale back down your computing nodes to save money. 

Snowflake has concluded that scalability in storage and compute needs to go from the smallest to the most massive scalability. There is no better place to make that happen than the public clouds of Amazon, Microsoft, and Google.  Snowflake merely has to spin up more compute when needed, and there is limitless storage available from each cloud provider.

3) Customer retention is gold in the computer industry.

Snowflake understands that customer retention on the cloud is vital, so every customer they gain will most likely be a long-time customer, and tell all their friends in the industry about the experience.  The average customer only pays Snowflake $65,000 per year. Still, the number of customers is essential to investors, and customer retention is high because most customers consider it is challenging to migrate between systems.

4) High-powered investors are critical.

The bet two advantages for Snowflake right now are the investors of Salesforce and Berkshire Hathaway.

The Oracle from Omaha, Warren Buffet, does not invest in companies that do an IPO.  The last company Warren Buffet invested in during their IPO was Ford Motor Company in 1956!

Warren Buffet’s Berkshire Hathaway made 800 million dollars, more than three-quarters of a billion dollars on the Snowflake IPO’s first day.  That is what youngbloods bring to an organization because this transaction is credited to Berkshire Hathaway employees Todd Combs and Ted Weschler.

5) Who are the biggest losers in the IPO?

Who is the biggest loser?  Legacy database vendors such as Teradata have spent four decades as an industry data warehouse leader.

Teradata argues that their large customers will not move to Snowflake; however, Teradata lost its largest customer to Snowflake.  Capital One dropped Teradata and is now Snowflake’s largest customer.  Capital One pays Snowflake 29 million dollars per year, making up 11% of Snowflake revenue.

Teradata has built incredible hardware that works beautifully on its own Teradata Private Cloud. Still, Teradata can not use their hardware on the AWS cloud or the Azure or Google clouds, so they are like a great white shark without any teeth.

6) Sharing data between customers and providers is revolutionary.

I will give you a few other brilliant concepts. Snowflake is introducing the sharing of data among Snowflake customers and providers.  Some people provide data such as weather, crime, social media, the list goes on and one.  Snowflake customers can purchase and query this data, as well as their internal data.  What an advantage.  Snowflake customers and even share specific data with their customers so that Capital One can share data with Capital One investors and customers. 

The sharing of data is a future trend that will be earth-shattering.

7) Standard SQL that makes migration of applications easy is essential.

Something that nobody else will mention to you, including the Snowflake employees, is that Snowflake runs on standard SQL. Still, the SQL they accept is more robust by far than any other database anywhere. Almost every query from every other system works on Snowflake, so applications’ migration is virtually a guarantee.

How do I know about the Snowflake SQL?  I have written 30 books on SQL, and I just wrote a 557-page book on Snowflake SQL!

8) Hiring a proven CEO can make all of the difference.

Frank Slootman is the CEO and one of the biggest IPO giants in the industry.  Frank Slootman has an incredible track record of taking companies public and growing revenue at outstanding paces.  He took a company 2003-2009 with no customers or revenue (startup data domain) to an IPO in 2007, and over 1 billion dollars in sales and 2009 and was acquired by EMC for 2.4 billion dollars.  Frank also became CEO of a company called Service Now from 2011 to 2017, took them through their IPO, and ran up over 270%.

The conclusion is that Snowflake is not the fastest system, and it will be expensive for some customers.  Having friends like Warren Buffet and Salesforce will make a huge difference.  The 70 billion dollars from investors will also help.  There is a reason that Snowflake’s IPO is the richest ever in the software business, so watching them rise will be part marketing, part investor, but their most prominent path to success is growth. Snowflake’s most brilliant strategy is investing in the cloud and knowing that ease-of-use on all three major clouds (AWS, Azure, and Google) is priceless.

If you want to migrate to Snowflake or any cloud or on-premise database, you should look into the Nexus Pro Desktop and Nexus Server. Once you install your desktop and a Server with the Nexus software, you merely pick the source system, the tables you want to move, the target system’s database and press execute.  You can even set up a Proof of Concept (POC) and move your source data to multiple clouds.  Give me a call or write me an email for more information.

Thank you,

Tom

Tom Coffing
CEO, Coffing Data Warehousing
Direct: 513 300-0341
Email: Tom.Coffing@CoffingDW.com
YouTube: CoffingDW
Website: www.CoffingDW.com