GitLab IPO: Details and Analysis

The TechCrunch Exchange: GitLab's Successful IPO and More

Welcome to this week’s edition of The TechCrunch Exchange, a newsletter focused on startups and market trends. This newsletter draws inspiration from the daily TechCrunch+ column of the same name.

Greetings! We hope you are enjoying your weekend. An additional episode of Equity is available today, providing in-depth analysis of the recent dispute between China and Microsoft regarding LinkedIn. For those seeking further information, it is now accessible.

GitLab's Landmark IPO

The most significant financial event in the startup ecosystem this week was undoubtedly the highly successful initial public offering (IPO) of GitLab.

For those unfamiliar, GitLab submitted its IPO filing, and initial assessments indicated a potential valuation of approximately $10 billion based on current market conditions. However, these projections proved to be conservative. GitLab ultimately increased its IPO price range considerably, exceeding its original estimates, and finally priced its shares at $77. As of late Friday afternoon, at the time of this writing, the stock is trading at over $108 per share.

Insights from GitLab CEO Sid Sijbrandij

I had the opportunity to speak with GitLab CEO Sid Sijbrandij about the IPO. Having interviewed Sijbrandij previously, starting with this initial report, it was a pleasure to reconnect with him on this momentous occasion, while respecting the standard restrictions imposed by the SEC.

Here are some key takeaways from our conversation:

Timing of the IPO: Sijbrandij explained that GitLab met all the necessary criteria for going public, including achieving sufficient revenue scale, predictable revenue streams, and ensuring regulatory compliance. Notably, the IPO date coincided with the tenth anniversary of when co-founder Dmitriy Zaporozhets wrote the company’s first lines of code – a meaningful milestone.
Net Retention and Revenue Predictability: GitLab’s robust net retention metrics played a role in establishing revenue predictability, although Sijbrandij refrained from explicitly confirming this.
The Shift in Open-Source Perception: Open-source code is now considered an asset rather than a liability. This observation aligns with a trend we highlighted previously. Having open-source code fosters stronger, lasting relationships with developers, which is often crucial for product-led growth strategies. This represents a significant departure from the attitudes prevalent a decade ago, and may explain Microsoft’s evolving stance on open code.
Potential Expansion into MLOps: Regarding a possible move into the Machine Learning Operations (MLOps) space alongside its existing DevOps offerings, Sijbrandij remained noncommittal. However, given the rapid growth of the MLOps sector, it wouldn’t be surprising to see GitLab explore this emerging market. The company now possesses the financial resources to pursue such ventures.

The successful IPO demonstrates a positive trend for DevOps companies and highlights the increasing value placed on open-source models in the tech industry.

Cloudflare's Expansion into Storage Services

Recent news from late September highlighted Cloudflare’s entry into the “storage as a service” sector. The company announced plans to provide cloud storage solutions leveraging its extensive network of global data centers. This move represents a departure from Cloudflare’s core competencies, which traditionally center around website performance and security enhancements.

The question arises: why would a publicly traded company venture into the highly competitive and often commoditized storage market? Ron Miller posited that Cloudflare is effectively externalizing infrastructure initially developed for its own internal needs.

Furthermore, by reducing certain costs, Cloudflare’s R2 storage service aims to undercut the pricing of established providers like Amazon Web Services (AWS). This competitive pricing strategy is a key element of their approach.

A potential trend is emerging. It’s plausible that other large technology companies, possessing a significant global infrastructure and specializing in specific digital services, will also begin offering seemingly niche infrastructure tools.

These tools will initially present modest competition to the offerings of AWS and Microsoft Azure. This strategy isn't necessarily illogical, and can be understood through analogy.

A Parallel with Intel's History

Consider Intel’s long-standing dominance in the CPU market. For years, Intel dictated the landscape with its processor technology. However, this position was challenged not only by the rise of GPUs utilized in cryptocurrency mining, but also by numerous startups innovating in areas like AI-optimized silicon.

In this comparison, AWS represents Intel, while services like Cloudflare’s R2 embody the disruptive potential of these emerging technologies. The dynamic is shifting.

The era of direct price wars between AWS and Azure appears to be waning. The focus is now evolving beyond simple cost reduction.

What new strategies will define the future of cloud infrastructure?

Cloudflare is expanding its services beyond its core competencies.
R2 aims to offer a more cost-effective storage solution.
Other large tech companies may follow a similar path.

The competitive landscape is becoming more complex, with new players and innovative approaches challenging the established leaders in the cloud infrastructure market.

Various Updates and Observations

A consortium of venture capital firms from the Midwest region have collectively invested $3.5 million into Presidio. This digital vault startup is focused on providing services to individual consumers.

Based in Florida, Presidio is currently preparing for its official launch, anticipated in 2022.

The emergence of a storage-focused startup in the current climate is particularly noteworthy and raises several points for consideration.

Carta's New Data Offering

Carta, a company specializing in cap table management software, has recently released a new data product. This offering has proven to be quite engaging for those interested in exploring funding trends.

The product allows users to interact with a substantial amount of funding data, sorting it by time period and company classification, offering a valuable resource for analysis.

UK Startup Redomiciles to the EU

Initial plans to detail an essay concerning a UK-based startup’s decision to relocate its legal domicile to the European Union have been superseded.

Natasha Lomas has already published a comprehensive report on this subject, providing a more thorough analysis than could have been offered here. Her article is recommended for those seeking further information.

Freetrade Reaches a Milestone

In the United Kingdom, Freetrade has successfully acquired 1 million registered users.

This achievement is significant, demonstrating that the surge in popularity of platforms like Robinhood extends beyond the United States and represents a global shift in consumer investment behavior.

This international trend is expected to benefit numerous startups operating in the financial technology sector.

Alex