Confluent shares rose more than 8% to a new high

Confluent shares rose more than 8% to a new high.Confluent surged more than 60% since its IPO.

Confluent's IPO date on Nasdaq was June 24. The company priced its shares at $36 to raise $828 million through an offering of 23 million shares, under the ticker CFLT. This was above the expected range of between $29 and $33, and the company may be set for a valuation of more than $9 billion.

What does Confluent do?

Confluent is a Silicon Valley-based tech company that enables enterprises to access and interpret fluid data in the form of real-time streams, in order to better manage their operations. Information is derived from sensors placed in areas such as manufacturing floors and retail stores, which are used to monitor everything from inventory levels to stock capacity. Then, the information is transferred to a data lake for analysis.

The company was founded in 2014 by LinkedIn engineers Jay Kreps, Jun Rao and Neha Narkhede, who created Apache Kafka, the open source ‘distributed storage system’ on which Confluent is based. With a $500,000 backing from LinkedIn, the trio rolled out the software platform for early use cases at the professional network, handling data streams with billions of messages.

However, the ambition was bigger, and the same year the founders secured a $6.9 million round of funding led by venture capital firm Benchmark. The company quickly secured the custom of a range of tech luminaries, from Twitter to Netflix to Uber, which used the service for such functions as real-time analytics and fraud prevention.

Confluent would go on to raise a further four rounds to the present day, totalling some $456 billion, according to Crunchbase.

As of most recent 2020 figures, the company’s revenues are in excess of $300 million, with revenue in the first quarter of 2021 jumping 51% from the year previous. The company has around 1,500 employees.

What is Confluent’s competition?

Confluent’s competition comes from the likes of Amazon Web Services, Apache Software Foundation, Cloudera and Microsoft. While the company has partnerships with some of the tech giants (see below) it is also faced with the prospect of competing against many of them. However, the edge may be in Kreps’ assertion that the Apache Kafka system is faster than traditional messaging systems, and hence more suited to large volume data streams.

How does Confluent make money?

Confluent makes money through subscriptions of its products Confluent Cloud, a fully-managed cloud-based software as a service offering, as well as its Confluent Platform, its self-managed multicloud software product. It also sells support licenses for its open-source software, as well as proprietary software, freemium services and other miscellaneous licenses.

What is Confluent 's business strategy?

Confluent’s business strategy is based on the concept of combining on-premises services with managed services, as mentioned above. However, the company reportedly sees the coronavirus pandemic, which resulted in customers needing to advance their digital capabilities on less budget, as accelerating a shift to managed services.

June 2020 saw the company hire new CFO Steffan Tomlinson, former CFO of Google’s cloud division and armed with a demonstrable track record in IPOs, indicating the company’s appetite for flotation and accelerated growth.

The company has also initiated partnerships with giant tech incumbents to broaden its reach. In April 2019 it partnered with Google Cloud and integrated Confluent’s managed service with Google Cloud Platform.

Additionally, November 2020 saw the company announce plans for a partnership with IBM, where the computer manufacturer would be reselling Confluent Platform to its own users.

Finally, in January 2021 Confluent unveiled a strategic alliance with Microsoft that would allow Confluent Cloud to be accessed as a fully managed service directly available on Microsoft Azure.

Is Confluent profitable?

Confluent is not currency profitable; it reportedly lost $229.8 million in 2020. That year, the company’s losses widened following a jump in operating expenses to $122.5 million, although this was caused mainly by equity compensation to investors.

As with all highly-capitalised businesses with a significant burn rate, investors will be watchful of the scale of losses and if Confluent’s margins look to trend in the right direction soon.

How much is Confluent worth?

The 2021 Confluent IPO could see a valuation of around $9 billion.

Prior to that, the most recent valuation in April 2020, when it raised a $250 million series E round of funding, saw Confluent worth $4.5 billion, with a 2019 raise of $125 million equalling a $2.5 billion valuation.

Who owns Confluent?

Confluent is owned by a variety of shareholders, with Benchmark as the largest at 15.3% ownership of Confluent's common stock. Other stakes are held by the likes of Sequoia Capital (9.3%), Index Ventures (13%) and Jun Rao (10.6%). The percentage of the business retained by the founders is unclear.

Who are the directors of Confluent?

Confluent has a number of key personnel that have helped progress the company to its current multi-billion dollar valuation. Here are some of them, correct as of June 21 2021.