New IPO: Pager Duty

Hey all, I’ve been far too active lately which has made it hard to discuss several of our companies… sorry about that!

But, here’s a soon to be IPO I want to dive deeper into. Have not done the research yet, but posting here as a reminder to myself or to share and see if anyone on the board wants to collectively do a deep dive.

Any takers?

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Oops. Link…

S-1 Link.…

48% Rev growth
85% GAAP Gross Margin
139% Net Retention Rate
10,806 Customers
33% of the Fortune 500 companies

Our mission is to connect teams to real-time opportunity and elevate work to the outcomes that matter.
PagerDuty acts as the central nervous system for the digital enterprise. PagerDuty harnesses digital signals from virtually any software-enabled system or device, combines it with human response data, and orchestrates teams to take the right actions in real time. Our products help organizations improve operations, accelerate innovation, increase revenue, mitigate security risk, and deliver great customer experience

Examples of how various teams use our platform include:

Box uses PagerDuty to help ensure that its services are always available to its customers, leveraging PagerDuty Modern Incident Response to run automated response plays that enable teams to mobilize faster and take action in real time.

GoodEggs uses PagerDuty to enable warehouse operations and development teams to analyze signals from refrigeration units to ensure food stays fresh for deliveries.

Okta uses PagerDuty for its digital operations to remove friction from the incident response process so that teams can identify, escalate, and resolve incidents, while mitigating customer impact.

Slack leverages the PagerDuty platform to orchestrate real-time response across teams to maintain high availability and reliability for its millions of users across the world.

The strength of our culture is key to attracting and retaining the best talent, as demonstrated by our high employee retention rates, and, as of January 31, 2019, a Glassdoor rating of 4.5 out of 5 and 100% approval rating of our chief executive officer.

Austin again: this looks worthy of investigation. They’ve got some very high-quality investors. Need to learn more about TAM, NPS, and their management team.


Hi Austin,

My first impression is that the market for this is not very large. However, the technology sounds like a nice tuck-in acquisition for Twilio.



Hmm. Two red flags. Company is 10 years old and had under $100M in annual revenue in 2018 and only provided results back to 2017 which makes comparisons/growth hard to evaluate.

PagerDuty, which was founded in 2009, helps alert IT employees when there are tech incidents. For its 2018 fiscal year ending January 31, PagerDuty generated revenue of $79.6 million and had a net loss of $38.1 million. PagerDuty didn’t report its previous full fiscal year, so its difficult to compare its annual growth or losses.


Hey Austin,

This looks well worth investigation and good find - work with TWLO, OKTA and ESTC. Dang.

The name, though, PagerDuty - wow. Peter Lynch said a bad/funny name is actually a good thing as it keeps people away until the growth is undeniable and all pile in. His example was Pep Boys Manny Moe and Jack.

Cursory glance at their site - they definitely look like motivated bunch with legit purpose. Anyway, thanks for bringing new find to the board. Really interesting company.


Thanks Dan. I'm struggling with the lack of revenue. Growth is fine but sub 100M after 10 years bugs me.

Also, judging by the private valuation with such low revenue, I'm guessing it will be one of the highest P/S stocks around when it comes public.

But maybe there's been recent developments that have ignited growth and the company is at a launching point? Mayne the money from the IPO will help with that growth?

The name, though, PagerDuty - wow. Peter Lynch said a bad/funny name is actually a good thing as it keeps people away until the growth is undeniable and all pile in. His example was Pep Boys Manny Moe and Jack.

It reminds me of the show 30 Rock (2006-2013). To make the lead character’s boyfriend look like a total loser he was written as a beeper salesman. He proudly (and cluelessly) claimed to be the Beeper King of New York.



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Hi Austin,

Thanks for reminding me about this one - saw the notification on seeking alpha earlier in the week and forgot all about it.

Management lists their TAM as $25 billion - take that for what you will I guess:

Our Market Opportunity
Every business across every industry is undergoing digital transformation. We believe our platform addresses every team member who is associated with the development, delivery, and operations of the digital experience. Our platform has demonstrated use cases across developers, IT, security, and customer support. We estimate there are approximately 85 million users in the developer, IT, security, and customer support segments, comprised of:

22.3 million global software developers

18 million information and communications technology skilled workers

43.7 million customer support and success workers (applying U.S. Bureau of Labor Statistics data on a global basis)

1.2 million security operations workers (applying U.S. Bureau of Labor Statistics data on a global basis)
We estimate our total addressable market is over $25 billion. To calculate our total addressable market, we multiply our estimate of 85 million potential users by our average revenue per user for the financial year ended January 31, 2019.
We currently have less than 1% penetration within these markets. In addition to our core use cases, we are seeing our customers use our platform across their business operations and industrial operations.
Delivering on the promise of digital transformation is a top priority for companies as they fight to stay relevant to their customers. We believe spending on application development, IT operations, security, and customer service will increasingly shift toward processes that enable digital transformation, including digital operations management.

You asked earlier why they are only near $100mln in revenue since 2010. Appears they were formally a single use product for on call management:

PagerDuty was founded by three former developers who were often asked to provide on-call support for their applications. Frustrated with the inefficiencies of existing solutions and the resulting negative impact of these solutions on their day-to-day lives, they started PagerDuty with the goal of building effective, easy-to-use software that enhances the lives of on-call responders while improving their productivity and work-life balance. Since our founding in 2009, we have evolved our platform, constantly innovating and improving the value we deliver to customers. We have expanded our capabilities from a single product focused on on-call management to a real-time operations platform, spanning event intelligence, incident response, on-call management, business visibility, and analytics. We have invested in developing the scalability, reliability, and security of our platform, allowing us to address the needs of even the largest and most demanding enterprise customers. We have spent years building deep integrations into over 300 ecosystem partners so that our customers can use PagerDuty to gather and correlate digital signals from virtually any software-enabled system or device.

It’s a shame they only provide such a limited amount of financial data… basically year end 2018 and nine months through 10/31/17 and 10/31/18.

They do provide customers with greater than 100K ARR:

10/31/17: 132
10/31/18: 203

1/31/18: 144

They are as you would expect any of these companies, losing money, cash flow negative, and spending more than 50% of revenues on S&M.

For all you accounting fans out there, they did adopt Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606), effective January 1, 2017, which was prior to fiscal 2018. As such, the consolidated financial statements present revenue in accordance with Topic 606 for the period presented.

I’m no techie, so I thought all this stuff sounded like they would be direct competitors with New Relic APM and Elastics version of it… but, according to the S-1:

The market for digital operations management is nascent, fragmented, and constantly evolving. We primarily compete against in-house solutions and manual processes and occasionally against software providers that may compete against certain components of our offering. Our primary competitors include OpsGenie (acquired by Atlassian) and VictorOps (acquired by Splunk).

SO I guess digital operations management is very different from Application Performance Monitoring.

Prior to the IPO directors and executive officers own 16% of the company.

If you made it this far, I’d agree that it looks interesting so far. Hopefully as we get closer to the IPO, we can get access to their IPO roadshow presentation where we can learn a bit more…



One of my favourite VC writers has written up the S1. I always enjoy his writing.

Haven’t fully read it but here;

“PagerDuty IPO | S-1 Breakdown” by Alex Clayton