Hadoop and Crowd-based Lending: What We've Learned from Last Week's Tech IPOs
Phil Haslett | November 17, 2014
Last week was an active one for Tech IPOs:
- New Relic, an application performance management system, filed Monday. The company reported $63 million in revenue last year. Investors include Trinity, Benchmark, and Fidelity.
- HortonWorks, a big data company that leverages Hadoop, is valued at $1.8 billion. They reported $33.4 million in revenue over the past 9 months, and $86.7 million in losses in the same time period. Investors include Benchmark, Index Ventures, and Yahoo! (with a 19.7% stake). More info from the Wall Street Journal here.
- Lastly, lender OnDeck Capital filed their IPO last Tuesday, targeting a $150 million raise. OnDeck provides loans to small- and medium-sized businesses quicker and cheaper than typical banks. They reported $64.5 million in revenue in the past six months. Investors include Google Ventures and First Round Capital.
The IPOs shed some light on two tech sectors that we should be seeing some continuing activity in: Hadoop vendors, and web-based lending businesses.
Hadoop-related Big Data
HortonWorks is the first of three large tech companies, which use Hadoop. to go public. The other two are MapR Technologies
. Cloudera has the benefit of receiving a $700 million investment from Intel, and can probably wait longer to IPO. Additionally, they claim to have the most paying clients (600), compared to only 300 clients for HortonWorks. MapR previously shared their intentions to go public by 2015
I got a little ahead of myself. A lot of you are probably asking what Hadoop is. Apache Hadoop
(its full name), is an open-source software (meaning that it's free to use) used for big data storage and analysis. MapR, Cloudera and HortonWorks all offer software layered on top of Hadoop that makes it easy to use and apply for the end-user. The end-users are typically large enterprises that are struggling to store and make sense of their massive amounts of data. How massive? Apparently,Yahoo! has 455 petabytes stored in Hadoop.
So why have online debt platforms like OnDeck grown so much faster than the equity crowdfunding platforms? It comes down to three things: product understanding, investment duration, and market size. Most investors, either retail or institution, are familiar with debt in some form; a mortgage, a credit card, and a student loan are all debt products that the average person has encountered. Additionally, debt is a financial instrument that returns capital much faster than equity in most cases. For instance, lenders on LendingClub likely receive their first interest payments within months of committing capital. Compare that to the typical angel investment, which takes an average of nine years to reach maturity
. And lastly, there's a lot more debt out there than equity:
Worldwide stock market capitalization: $54 trillion
Worldwide debt outstanding: $158 trillion
What to watch for
On the heels of these three IPOs, here's what investors can expect to see in the coming months:
|With the exception of TubeMogul, publicly traded AdTech stocks are down over 30% in 2014. (Source: Google Finance)|
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