Rubrik, a data cybersecurity company that has collected more than half a billion dollars while being private, was filed to be released after the bell on Monday. Following the debuts of Reddit and Astera Labs, Rubrik’s choice to go public now could indicate that the IPO market is heating up for tech companies.
As a private market company, Rubrik last raised a letter round in 2019 when it closed $261 million at a $3.6 billion post-money valuation, according to Crunchbase data. The company could be lucky to price its IPO shares significantly higher than the last primary round. Buyers in the secondary market have bid for shares valuing the company at $6.6 billion in recent months. Secondary data platform Caplight estimates the company’s valuation to be around $6.3 billion.
Rubrik sells its cloud-based data protection platform to businesses. As of January, the company had more than 1,700 customers with an annual contract value of $100,000 and nearly 100 customers paying Rubrik more than $1 million annually, according to its IPO filing.
Within the development of Rubrik
Rubrik initially presents itself as a modestly growing software business with net losses of $354 million in its most recent fiscal year.
From fiscal 2023 to fiscal 2024, which ended at the end of January this year, the company’s revenue rose from $599.8 million to $627.9 million, or just under 5%. However, subscription revenue rose 40% over the same period, rising from $385.3 million to $537.9 million.
Growing its subscription revenue, not its legacy revenue, is the engine that could propel Rubrik to a successful IPO. The company began life as a software company that sold its product under a perpetual license. However, after several years, the company began shifting toward a subscription model in fiscal 2019. It has expanded its subscription (SaaS) offerings over time and told investors in its IPO filing that it expects its non-recurring revenue to “will continue to decline” as it does not generally offer perpetual licenses today.
Rubrik’s transformation into recurring revenue is nearing completion, with the company reporting that in its most recent quarter — the period ending January 31, 2024 — its subscription-related top line accounted for 91% of its total revenue. This was up from 73% in the previous quarter.
The shift to subscription revenue helped Rubrik boost its gross margins, which rose from 70% in fiscal 2023 to 77% in the recently completed fiscal 2024.
But a growing software business with recurring revenue and improving gross margins haven’t solved Rubrik’s tough losses. The company’s net losses widened from 46% of revenue in fiscal 2023 to 56% in fiscal 2024, totaling approximately $354.2 million in the twelve months ended January 31, 2024.
However, despite its steep loss, Rubrik’s cash burn has been relatively modest. The difference between its net losses and operating cash deficits is not resolved through the excision of expanded stock-based compensation. These are single-digit million annual company expenses. Instead, the upfront collection of measurable revenue has helped Rubrik expand its deferred revenue by hundreds of millions over the past few years and reduced its net operating cash flow over the same period.
A Silicon Valley story
Rubrik’s potential IPO could prove to be a coup for Lightspeed Venture Partners, a well-known venture capital shop in Silicon Valley. Bipul Sinha, co-founder and CEO of Rubrik for the past decade, is a former Lightspeed partner. The venture capital firm led Rubrik’s Series A and, per Crunchbase, participated in all of its successive funding rounds. Investing in a former partner is not unheard of in venture circles, with some firms even developing founder or entrepreneur-in-residence roles internally. But seeing Sinha’s company go public with 23.9% ownership in the hands of his former employer highlights how personal networks can influence who raises capital in startup land.
Greylock is the other venture firm with the most in line for Rubrik’s planned IPO, with investor Asheem Chandna on the board and owning about half of Lightspeed’s stake, or 12.2% of Rubrik’s equity , before selling new shares. in the public offer. Greylock led Rubrik’s B series.
Other investors who led rounds of letters in Rubrik fell short of the 5% threshold required for mandatory inclusion in the company’s S-1 filing, but Bain Capital Ventures’ Enrique Salem, who led the company’s Series E, is also present on the board. Other board members are Yvonne Wassenaar, the former CEO of Puppet, Mark McLaughlin, who also sits on Snowflake’s board, and John Thompson, another Lightspeed owner and former Microsoft board member. The NBA player and investor was Kevin Durant had been announced as a board advisor to the companyalthough not mentioned in the public registration filing.
The founders are the kind of Silicon Valley A-list that the VC community loves, demonstrating the often inbred relationships these tech companies can have with each other through their personal networks. Related third-party disclosures point out that Sinha co-founded another startup called Confluera, where he still sits on the board. In fiscal 2022, Rubrik spent $124,640 with Confluera. Co-founder Arvain Jain, who remains a major shareholder but has gone on to found a new favorite AI startup, Glean, is also well known from his days as an early Googler. Rubrik says in its S-1 filing that it has spent $356,000 with Glean since April 2021.
While Rubrik notes that the purchases of technology products and services by Confluera and Glean were “negotiated in the ordinary course of business,” they highlight the connections that exist between many Silicon Valley operators. These same connections can help founders replicate past successes by buying and selling to friends and former colleagues. The Rubrik S-1, while not indicative of anything untoward, is a reminder that network effects in startup and business cycles are often based on relationships and their geographic density in places like Northern California.
What’s on the line
There are more than 1,000 startups in the world today with a valuation of $1 billion or more. Those still in competitive shape must find a way to exit and return funds to their backers. With the IPO market well behind the pace needed to clear those decks, many private market companies are waiting for a clear launch weapon to pursue their own public offerings. If Rubrik can price and trade well in its own debut, it could help other enterprise-focused software companies that are still unprofitable get a shot at going public. This would be welcome news for founders and venture capitalists alike.
