Steppenwulf was also quick to point out that he never had the confidence in Pivotal that he had in Mongo. As if he did not want to step back his review of Pivotal but that he really had second thoughts about it. So did a lot of people. There was still money to be made on Pivotal. I know I made some.
Microsoft, Google, enterprise royalty were behind Pivotal. Ford created an entire technology group around Pivotal. The U.S. Air Force modernized behind Pivotal. GE spun off a multi billion dollar business that is platformed on Pivotal. It’s economic numbers were great. Going public we all expected that Pivotal would solve its on-boarding problems. Sigh…that never happened. They never attracted more than a few new customers a quarter and Dell has taken them out of their misery very quickly once Dell realized that Pivotal had a sales force that most local Girl Scout troupes could whomp.
I get the feeling that Crowd is not so fragile as some may say. Crowd is creating a platform with networking effect that feeds off the entire infrastructure and not just a simple end point solution to be disrupted by the next big thing.
Valuation wise, Mongo or Crowd. Crowd may actually be less expensive. Not by price to sales but by value of revenues. Presently Crowd has an enterprise value of about $8.9 billion or so. Let’s give them a 25% long-term operating margin. At 40x on this information Crowd needs $890 million in revenues, or a 10x multiple of enterprise value to revenues to virtually reach that point.
Mongo has an enterprise value of around $7 billion. Give it a 40 enterprise value to earnings multiple with 20% long term operating margin (and I tend to think 15% is better but lets stick with 20) and you need $875 million in revenue to equate to that 40 enterprise to virtual earnings number.
Now is Crowd or Mongo more likely to reach their respective figures quicker? Is Crowd or Mongo more likely to have the mature operating margin I put out there? I Crowd or Mongo more likely to exceed the operating margin I put out there? Finally, is Crowd or Mongo likely to have long term hyper-growth and CAP dominance.
I think quite easily all but the last question goes to Crowd. The last question is under dispute. Crowd is attempting to create an infrastructure around its platform, and to get its customers to buy 4 or more packages from this platform. That to me, if successful, is not easily disrupted. A new way of doing things that is clearly materially better will be required to create switching costs. And Crowd has demonstrated that they have capabilities that existing competitors just do not have at present. And fixing 1 or 2 things does not make the competitors equal.
Mongo, I won’t argue with the last one. Their long-term platform dominance seems secure, but their financial progress, although excellent, appears to be of a more moderate nature.
Thus I think that Crowd’s staying power and actual relative cost is being respectively underestimated and over exaggerated; and I think Mongo’s staying power does give it a claim that their revenue may be worth a bit more per margin point than Crowd due to this CAP, but not as much as many here would think if they took a deeper look at Crowd.
One thing we can see with the recent IPOs, is they have done what many of their predecessors did, with Twilio that grand daddy of this (Zen as well), Veev did it, SHOP has had its sparks, I remember when ISRG did it, and that is go boom after IPO and then have a substantial crash, and then boom go up again as the fundamentals get behind the valuation again (all with never really getting cheap enough).
Mongo has already been through that. Crowd is going through it. In the end, Crowd wins hands down on financials and business momentum. It is debatable if Crowd might have similar staying power in regard to long term hypergrowth and staying power as Mongo has. I think the answer is perhaps not if you go 5 years out, but until then, they look pretty equal to me in that regard.
Winner Crowd given the totality of circumstances. Since 5 years out is totally unknown I will deal with that in 2 to 3 years and revisit.
Tinker
