Overall, 2017 has been a much better year for tech IPOs than 2016. But the blessings of the market gods haven't been evenly distributed, with some types of offerings doing much better than others.
Enterprise software upstarts, for example, are pretty well-represented on the list of winners. This includes companies producing a healthy amount of red ink. As long as a software firm has been delivering strong sales/billings growth and there's confidence about the firm's competitive standing, investors have been willing to overlook large near-term losses.
On the other hand, the shorter list of disappointing 2017 tech IPOs includes three consumer-facing Internet companies -- Snap Inc., Blue Apron Holdings Inc. and Netshoes Ltd. -- that have been hemorrhaging cash and are beset by worries about competition from one or more larger, well-established firms.
On Oct. 19, MongoDB Inc. (MDB) joined the ranks of fast-growing, money-losing, enterprise software names to see a strong 2017 debut. After pricing its 8 million-share offering at $24 (above an elevated $20 to $22 range), shares opened at $33 and as of the Oct. 20 close are at $30.68, up 28%. That leaves the company valued at $1.85 billion after accounting for outstanding stock options and warrants, or about 15 times trailing sales.
MongoDB sells on-premise and cloud versions of a popular open-source database under the same name, while leading the community responsible for developing the database. Thanks partly to its popularity among developers, startups and big-name Internet companies, it's arguably the most popular NoSQL database on the market.
Whereas traditional SQL relational databases from the likes of Oracle Corp. (ORCL) , Microsoft Corp. (MSFT) and IBM Corp. (IBM) store data in structured tables that are linked with each other and provide a high level of consistency for data requests, NoSQL databases store data in standalone "documents" that can be housed in a variety of places and whose data doesn't have to be as structured.
Thus while NoSQL isn't ideal for many traditional database uses (for example, processing bank transactions), it's quite useful when a company is looking to store and run queries against a ton of unstructured or semi-structured data. Google, for example, uses a home-grown NoSQL database called Bigtable to power many of its services, including Search, Maps and Gmail. Amazon Web Services (AWS), meanwhile, has seen its DynamoDB NoSQL cloud database service embraced by the likes of Comcast, Netflix and Airbnb.
Many other companies, including Cisco, SAP, Verizon, Adobe and Intuit, have embraced MongoDB, which it should be noted is often run on major third-party cloud platforms. The company claimed 4,300 clients as of the end of July, including over half the Fortune 100. With the help of 1,100 customer adds, revenue (mostly from software subscriptions) rose 51% annually to $68 million during the 6 months ending in July. Net loss -- the result of big sales and R&D investments -- rose fractionally to $45.8 million, or $36.4 million excluding stock expenses.
MongoDB still has plenty of credible rivals; In addition to DynamoDB, there are rival NoSQL databases from Google and Oracle, as well as from a slew of startups. And the company still often competes with relational databases to the extent that it has to convince businesses a NoSQL database is a better option for a project.
But MongoDB's popularity within the NoSQL developer community -- developers often rave about the database's ease-of-use and flexibility -- together with its efforts to add enterprise-friendly security and management features -- have kept it on strong competitive footing.
Stitch Fix, too, can claim an enthusiastic core user base, albeit in a different market. The company, which just filed to go public under the symbol SFIX, offers a service through which users are delivered five clothing items for a $20 service fee after filling out a "style profile" outlining their tastes. Users then decide which items they wish to purchase and send back the rest, with the fee being deducted from their purchase price.
This might sound like a niche business, but Stitch Fix did manage to do $977 million in sales during the fiscal year ending in July, while also posting a $30.7 million adjusted net profit. The company reports having 2.19 million customers over the 12-month period ending in July, up from 1.67 million during the prior 12-month period.
But growth has been slowing: From the October quarter to the July quarter, Stitch Fix's quarterly sales growth has gradually slowed from 51% to 26%. As the company has stepped up its advertising spend to obtain new clients and bring back old ones, its profits have withered: Stitch Fix saw a $1.1 million adjusted net loss in the July quarter, after having posted a $9.7 million profit a year earlier. Though big differences also exist between Stitch Fix and Blue Apron's delivery businesses, Blue Apron also went public against a backdrop of slowing growth and declining margins.
And like Blue Apron, Stitch Fix has to contend with the specter of Amazon.com Inc.'s (AMZN) ever-expanding retail ambitions. Jeff Bezos' company is just a few months removed from launching its Prime Wardrobe service: It sends Prime members boxes containing up to 15 apparel items, and gives them 7 days to decide which ones to buy and which ones to return. The service doesn't offer the kind of personalization Stitch Fix does, but (true to form) Amazon doesn't charge any service fee.
All of that could spell a rocky debut for Stitch Fix in the absence of subdued IPO pricing (the company is reportedly aiming for a $2 billion valuation). For while 2017 has been a fairly strong year for tech IPOs, investors have still been pretty selective in terms of which types of companies they've embraced.