2016 IPO Prospects: Overfunded Domo Looks Promising

According to Gartner, there is a shift in the BI market away from IT-developed reporting solutions toward business user-led analytics solutions. Gartner predicts that by 2017, most business users and analysts in organizations will have access to self-service tools to prepare data for analysis. Domo has made it to the Billion Dollar Unicorn Club riding on this trend and is now looking to go public.
Domo’s Offerings

Utah-based Domo was founded in 2010 by Omniture co-founder Josh James. The idea for Domo came out of his frustration in accessing relevant business data from multiple sources. Today, Domo is able to offer a unified intuitive platform that simplifies business decision making.

It integrates live business data from multiple data sources like Salesforce.com, Google Analytics, Box, LinkedIn, Facebook, and Instagram. It presents this data in the form of a live interactive dashboard, which can be accessed from any mobile device. Domo thus helps with real-time decision making and helps businesses adjust variables such as product inventory levels to better manage their product sales.

Domo’s Financials

Domo has over 1,000 customers which include eBay, MasterCard, Goodwill, Sage and Telus. The company claims to have a very sticky product with 150% revenue retention. The minimum subscription cost per year for its product is about $25,000 at a rate of $2000 per user for a team of a dozen at the least. The average revenue from each customer is $50,000. The company claims that customers typically ramp up their seats on the product every year. A credit card company, for example, ramped up from 25 to 50 and then to 350 seats within two years.

The company hit a revenue run rate of $50 million in December 2014. It was looking to achieve 100% y-o-y growth and a revenue run rate of $100 million in 2015.

In a survey by CB Insights, Domo was seen as the most investment worthy billion dollar unicorn, beating out the likes of Pinterest, Slack, GitHub, Eventbrite, Buzzfeed, Lyft, and Airbnb.

Apart from strong fundamentals, Domo’s strong management team is also working in its favour. James has a great track record – he had a successful run with Omniture which went public and was later sold to Adobe for $1.8 billion. Its CFO Bruce Felt has taken two companies public and has handled several mergers and acquisitions. He left SuccessFactors in August 2014 to help Domo prepare for an IPO.

James’ track record has also helped him in raising funds. So far, they have raised $484 million in financing from investors including Hummer Winblad Venture Partners, Benchmark, SV Angel, Transmedia Capital, Institutional Venture Partners, GGV Capital, Greylock Partners, Bezos Expeditions, Mercato Partners, TPG Growth, Salesforce.com, T. Rowe Price, Fidelity Investments, Morgan Stanley, Viking Venture Management, Founders Fund, Zetta Venture Partners, and Dragoneer Investment Group. They also have backing from investors like Marc Benioff, Ron Conway, David Lee,  Lars Dalgaard, Andreessen Horowitz, Mark Gorenberg, Hiroshi Mikitani, John Pestana, Dan Rose, Paul Sagan, Steven Singh, John Thompson, and Jeff Bezos.

Their last round of funding was held in April 2015 when they raised $235 million in funding at a valuation of $2 billion. An earlier round for $125 million in February 2014 had valued them at $800 million.

This exorbitant level of funding makes me a bit queasy, to be honest. Why does the company need so much money?

One hiccup for Domo could be that competition might get tougher with time. From giants like IBM, Microsoft, and Oracle to startups like GoodData and Birst, there is significant competition in the BI and analytics space. Domo has tried to keep away the competition by mostly keeping the product under wraps. They even have a non-disclosure agreement with their customers.

This segment is a part in the series : 2016 IPO Prospects