Service Provider Cloud

Mulesoft IPO Hits Wall Street

The market for enterprise technology IPOs has slowed down in recent years, as many of the hottest startups in the space have decided to sell themselves to other tech giants or remain private to avoid the pressures of quarterly reports to Wall Street.

However, that is changing a bit in 2017. First Snap Inc., the parent company of Snapchat, launched a successful IPO in early March, which raised about $30 billion in one day, although that number has come down in the last few weeks. (See Snap, Crackle & Pop: $28B IPO Stokes 'Bubble' Fears.)

Now, on Friday, March 17 Mulesoft is preparing to launch its own initial public offering on the New York Stock Exchange under the ticker symbol "MULE."

Although Mulesoft initially targeted its IPO in the $14 to $16 range, an updated filing with the US Securities and Exchange Commission on March 16 pushed the target price to $17 per share. If that holds true, the company will raise nearly $221 million from its IPO.

Mulesoft would then have a market cap of about $2.14 billion.

As of 11 a.m. Eastern, Mulesoft was trading at about $24 per share, a 46% increase over the initial price, pushing its market cap past $3 billion.

Founded in 2006, Mulesoft makes APIs that help enterprises and their IT departments connect different software and services together, and the company is betting on a future where businesses have to connect a number of different technologies together, including the cloud, big data, mobile and the Internet of Things.

The company estimates the market for these types of API services is worth about $29 billion.

Mulesoft has more than 1,000 customers and has managed to grow its revenue over the last several years, from $57.6 million in 2014, to $187.7 million last year. However, the company, like many other startups, posts losses as well. In 2016, Mulesoft's net loss totaled $49.6 million.

(Source: Mulesoft)
(Source: Mulesoft)

In its SEC paperwork, Mulesoft does warn of competition in the years ahead.

This not only comes from the likes of IBM and Oracle, which also play in this API field, but from companies using public cloud platforms -- Amazon Web Services, Microsoft Azure, Google Cloud -- to run more and more enterprise-level applications, which could then offer the same types of services and functionality that Mulesoft is selling.

One interesting note from the SEC filing: Mulesoft runs its own infrastructure on AWS, which also gives it something else in common with Snap besides the IPO. (See Snap Commits $1B to AWS.)

After a less-than-stellar year for IPOs in 2016, Snap, Mulesoft and the upcoming public offering from cloud indemnity management provider Okta have shown that investors are willing to put serious money into companies that provide on-demand and cloud services to enterprise, as well as consumers.

Even without an IPO, tech giants are willing to invest in these companies to gain an advantage in the growing cloud market. Earlier this year, Cisco paid a premium of $3.7 billion for AppDynamics, a day before that firm was scheduled to go public. (See Cisco's Chuck Robbins Talks AppDynamics, Jasper at MWC.)

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— Scott Ferguson, Editor, Enterprise Cloud News. Follow him on Twitter @sferguson_LR.

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ak22 3/28/2017 | 2:30:00 PM
Re: Impressive customers It's also prudent that they got in there early - there's a lot of potential for competition in this area not far down the line.
danielcawrey 3/21/2017 | 3:35:55 PM
Re: Impressive customers Mulesoft is smart in what it offers. Before enterprises had access to these types of APIs, it was a lot of hard work to connect different services together. 

Big companies need software like this to deal with their ridiculously complex systems. Mulesoft came aroun at the right time, that's for sure. 
kq4ym 3/21/2017 | 10:31:49 AM
Re: Impressive customers It's pretty amazing how the IPOs take off so well in this case a "46% increase over the initial price." Notwithstanding it's lost 50 million last year, one wonders if this is really a speculative bubble playing with those who have money to spare to buy stock, and not necessarily a good handle on when the companies will actually make some significant profits in a reasonable time frame?
Scott_Ferguson 3/20/2017 | 7:29:27 AM
Re: Mulesoft IPO @JohnMason: John, thanks for the questions. Let me see if I can offer some insight: The reason for looking at Snap Inc. is that it's the biggest IPO of the young year so far. It was the most anticipated, and generated the most interest. It also set the stage for what could be a better year for overall tech IPOs compared to last year when the market seemed to dry up. Between Snap, Mulesoft, and Okta, you have three tech companies headed to IPO, and we would have had AppDynamics as well, but Cisco decided it wanted, so now IPO there. Now, Snap is different than these others in that it's geared toward the consumer market, but the company itself is a consumer of enterprise cloud technology, and that included $2 billion investment in Google's cloud, as well as another $1 billion deal with AWS. That's why it's part of the discussion.
JohnMason 3/19/2017 | 10:26:52 PM
Re: Mulesoft IPO Also, I am guessing that First Snap is making large puchases of cloud services to deliver its product, if I understand correctly. I welcome feedback concerning whether I missed something in my understanding.
JohnMason 3/19/2017 | 10:19:40 PM
Re: Mulesoft IPO It may be that, in Wall Street's eyes, the broad category of tech stock includes both First Snap and Mulesoft, and the success of one in an IPO helped to signal favorable investment conditions for the success of the other. Does that make sense?
danielcawrey 3/19/2017 | 5:29:44 PM
Re: Mulesoft IPO Let's back up a second here. 

I'm a little confused why Snap is in this article. Aren't we talking about enterprise companies here? Hate to say it, but Snap is about as far from enterprise as you can get.
JohnMason 3/17/2017 | 10:36:21 PM
Impressive customers Those look like impressive customers on Mulesoft's website. As for increasing competition, I can imagine that the door will remain open for acquiring companies even after the IPO. In fact, maybe stock could be used by Mulesoft to acquire its competition, barring unforeseen dangers to the stock price.
Scott_Ferguson 3/17/2017 | 4:42:01 PM
Re: Mulesoft IPO The final on the Mulesoft IPO for the day: The stock closed at $24.75 per share, which is 45.6% above the starting price. That pushed the company's market capital past $3.1 billion. Now that this IPO is out of the way, what does it mean for the rest of the cloud market for the rest of the year?
Mitch Wagner 3/17/2017 | 3:51:53 PM
APIs APIs are emerging as crucial to the cloud economy. Enterprises need to be able to connect their cloud applications to customers, suppliers and partners, and APIs are how it's done. Mulesoft is positioned in a critical part of the cloud market. 
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