Elastic IPO Expected to Raise $250M
Elastic went public today on the New York Stock Exchange in what could be one of the big data industry’s hottest IPOs of the year.
Elastic started selling shares this morning under the ticker symbol ESTC at $36 per share. Oversubscribed demand led the Amsterdam-based company to raise its price target from $26 to $29.
Shares “popped” in early trading, and were up more than 90%, an indication of continued strong demand. The company is expected to sell 7 million shares during its IPO, which would amount to more than $250 million.
Elastic develops enterprise search software and a related stack of log management, visualization, analytics, and machine learning technology. All of the company’s software is open source, and much of it is free, except for “premium” components of its X-Pack add-on, including reporting, a graph database, and machine learning capabilities.
The Elastic Stack is widely used by millions of organizations around the world. The company boasts that its software has been downloaded more than 350 million times in its entire history, most of which has occurred in the past two years. At the current growth rate, it should hit 1 billion downloads by 2020.
The company has been effective at turning interest in the Elastic Stack into revenue via software subscriptions. It currently has more than 5,500 paying customers, almost double what it had 15 months ago. Elastic brought in $159.9 million in revenue in fiscal 2018, an 81% increase from the previous year. It incurred a net loss of $52.7 million in fiscal 2018, according to its S-1 filing, which we covered last month.
During its annual conference earlier this year, company executives explained its “growth via adjacency” strategy to Datanami. It all starts with search, which is a core capability that Elastic does well, as do other products based on Apache Lucene (including Solr).
Now, say an analyst wants to search through some log data, for example. It’s relatively easy – not to mention free — to get going with other parts of the Elastic Stack, including Logstash, Kibana, and Beats, to discover insights in the data.
That simplicity and ease-of-use is key to Elastic’s strategy. “You didn’t download a platform,” CEO Shay Banon said during the Elasticon conference. “You didn’t download a data lake or something like that. You actually downloaded a product that actually brought you value. That’s what we try to do with our users, and trusting us to solve other types of use cases as we grow through our users.”
IT admins and cybersecurity professionals may bring Elastic into an organization, but users in other departments, such as sales and marketing, find it to their liking. The monetization opportunity occurs for Elastic as usage in an organization expands and it dawns on managers that they need to consolidate and standardize the relationship with the company (Elastic) that makes the software that employees have come to rely on.
So far, it seems to be working well Elastic. And thanks to new and forthcoming machine learning features that Elastic is building into the software, the software is expected to become more capable as time goes on.
Editor’s note: This article was corrected. Elastic is based in Amsterdam, The Netherlands, not Mountain View, California. Datanami regrets the error.