Billion Dollar Unicorns: Hortonworks Needs To Deliver Results

A Markets and Markets report on Hadoop estimates the total Hadoop market to grow 55% annually to be worth $13.95 billion by 2017. Billion Dollar Unicorn club member Hortonworks is one successful player in this rapidly growing Hadoop market.

Hortonworks’ Offerings
Palo Alto-based Hortonworks was founded in 2011 with the mission of making Hadoop the technological foundation of the modern enterprise data architecture. In 2011, founder Rob Bearden tied up with Yahoo! to set up Hortonworks. They started with a team of 24 engineers from the original Hadoop team including Hadoop founders Alan Gates, Arun Murthy, Devaraj Das, Mahadev Konar, Owen O’Malley, Sanjay Radia, and Suresh Srinivas. By 2012, they had established their presence in the market by launching an Enterprise Grade Hadoop platform.

Hortonworks’ biggest advantage lies in their innovative architecture, which helps in providing a more secure platform while allowing greater interoperability of computing. Traditional Hadoop offerings are based on managing Big Data by using computing clusters that have been siloed by application. Instead, Hortonworks uses YARN, a technology that eliminates these data silo sets and allows for simultaneous processing of mixed workloads.

Earlier this year, Hortonworks announced the acquisition of SequenceIQ, an open source provider of rapid deployment tools for Hadoop. SequenceIQ’s products include Cloudbreak, an elastic and cloud agnostic deployment solution for HDP clusters, and Periscope, a policy-based autoscaling platform for multi-tenant HDP clusters. The acquisition will help Hortonworks deliver an automated solution for launching on-demand Hadoop clusters in the cloud to any environment that supports Docker containers. They will integrate SequenceIQ technology into the Hortonworks Data Platform and transition the technology to the Apache Software Foundation.

Hortonworks’ Financials
Keeping the open source nature of Hadoop in mind, Hortonworks has designed its business model as a commercial OpenSource company. Their platform is available for free to users and they earn revenues by selling software support subscriptions and providing additional value-added services like training and consulting.

The company has seen strong revenue growth, but profitability remains a concern. For the December ended quarter, their revenues increased 55% to $12.7 million with total billings growing 148% to $31.9 million. Net loss increased from $4.23 per share recorded a year ago to $5.38 per share for the quarter.

By segment, support services revenues grew 22% to $6.3 million and professional services revenues increased 172% to $6.3 million.

For the year, Hortonworks recorded revenue growth of 91% to $46 million. Billings increased 134% to $87.1 million. Net loss for the period reduced from $63.1 per share to $24.16 per share.

Back in December 2014, the company raised $100 million by selling their shares at a price of $16 each. Prior to the listing, Hortonworks was venture funded with $248 million raised from investors including Vertex Venture Capital, Accel Partners, Texas Atlantic Capital, Hewlett-Packard, Tenaya Capital, Dragoneer Investment Group, Index Ventures, Benchmark, Yahoo!, and Passport Capital. Their last round of venture funding was received in July 2014 when they raised $50 million at a valuation of $1 billion. The financial disclosures about their losses at the time of filing the IPO resulted in significant decline in market valuation. The company was then valued at $592.2 million.

But the IPO was a big success as the company was again valued at $1 billion. Their stock is trading at $20.99 with a market capitalization of $905 million. It had touched a high of $29.83 by January this year. It has dropped somewhat since.

This is an example of a company that is trading below their last round of venture funding post IPO, and has dropped below unicorn levels for now. It will have to climb up again to those levels with real performance, not just promise, at this point.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns