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If WeWork does debut for a price lower than its final, privately-sourced valuation, it will not be the first company to do so. Indeed, it won’t even be the first company to pull off the feat recently. Several other companies in the current technology cycle have managed a similar result.

Let’s remind ourselves who did.

: 2017

The seeds of Hadoop-focused Cloudera’s down IPO were planted in its enormous  that took place in early 2014. Worth just $765 million (post-money) after that brought the firm $65 million in new capital, Cloudera later raised a two-part Series F.

The first traunch, a , represented quick value growth in the two years since Cloudera’s Series E. The second part of the Series F, , mentioned previously, pushed the firm’s valuation to over $4.1 billion. ( led the first, took on the second.)

The firm’s real worth never caught up. After its March, 2014 Series F rounds, the company grew but not enough by the time it went public. Here are our notes from its IPO pricing cycle:

In its most recent fiscal year, which wrapped January 31st, 2017, Cloudera reported aggregate revenue of $261.0 million, up 57.2 percent from its preceding fiscal year. In that year, Cloudera’s revenues were a more modest $166.0 million. Cloudera also lost $187.3 million—down 7.8 percent from its gut-busting prior-year loss of $203.1 million. Those are GAAP results, mind, not adjusted figures.

It wasn’t enough. The company priced at $15 per share, valuing Cloudera at around $2 billion, a massive discount to its final private price. The company is worth just $2.3 billion today, years and a merger later.

: 2018

Ah, the Domo IPO. Amidst a successful and increasingly interesting Utah startup scene, Domo’s IPO was a rare misstep. The firm’s debut came after posting an impressive fundraising history. However, that fundraising wound up being more indicative of the company’s ability to raise, instead of its ability to grow.

Domo is worth $681.6 million today, according to Google Finance. According to Crunchbase the company . You generally want to see a multiple of the latter when you calculate the former. Domo is still underwater, quarters after its public offering.

And its sub-unicorn valuation is a fraction of the $2.3 billion it was once worth. The firm’s last private round, , did not provide enough space for the business intelligence company to grow into its valuation. Our review of its S-1 filing and constituent financial performance was largely incredulous. .

The market wound up pricing the high-burn, low-growth company at . In terms of percent declines from private valuation to IPO worth, this may be a record.

: 2019

Uber’s IPO, did you hear about it? If you’ve ever read Crunchbase News, you have. But just in case, a reminder.

In terms of a startup’s rise, Uber’s growth from startup to behemoth is now legend. From breaking rules around the globe, to raising billions and billions of dollars, to VC-CEO intrigue, Uber’s story is a distillation of the Unicorn Era.

Its IPO, however, was more comedown than comeback. The company, once expected to be worth over $100 billion when public, wound up pricing at $45 per share, valuing it at (higher on a fully-diluted basis). That figure was towards the low-end of its IPO range, making it a disappointment for the company.

Notably, an with that brought Uber $500 million . So, Uber’s IPO valuation was a hair under the company’s final private valuation (Crunchbase , but hang tight.) Regardless of how we value the firm (diluted, not diluted), or which final private valuation we peg to the firm, Uber’s shares opened lower than its $45 price and closed down on their first day.

The company’s quick share price declines wound up continuing. Today Uber is worth about $55.5 billion, and we’re including it in this list as it managed to barely meet its final private valuation while pricing its IPO but opened $3 per share lower. That’s down.

And given that Uber is now worth a fraction of that fabled, and now ridiculous-sounding $120 billion IPO guesstimate (bankers!), it’s a down IPO in spirit if not also in name.

Short List

It’s not a very long list of companies we can recall caring about and going public at a down valuation. If WeWork prices where it now seems likely, the company will have a lot to prove ahead of it. That said, Uber and Cloudera are still worth billions despite IPO troubles. Perhaps WeWork will manage a good debut, and find some positive momentum when public.

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Hello, and welcome back to the best and most magical part of the quarterly cycle: earnings season. I wanted to take a moment to detail a few trends that you should keep an eye on over the coming weeks, as every single public tech company spills the numbers concerning their recent performance.

Here at Crunchbase News, focused on private firms as we are, we don’t spend much time covering the earnings of the already public. But we do care what the market’s reactions to public company earnings tell us about how to value private companies. Crunchbase News covers high-growth private startups, often venture-backed and frequently focused on the tech space. This colors which public companies we keep an eye on.

That in hand, what follows is the Q2 2019 Crunchbase News Guide To What To Care About During Earnings If Private Companies Are Your Jam.

Things To Watch

Can strong earnings keep the Great SaaS Run alive?

Your favorite public SaaS companies are enjoying strong valuations at the moment. Indeed, according to our favorite cloud index, public SaaS and cloud firms are worth about 11x times their revenue using enterprise value in place of market capitalization.

Indeed, when you look at the (BVP) over time, that SaaS and cloud stocks are on a tear. Their market run has been predicated on both revenue growth, and investors’ willingness to pay more for that revenue than before.

This is what the Index looks like over the last year:

A blip in growth could see the firms’ revenue multiples compress, lowering their valuations. It’s something that we’ve seen before. But if SaaS companies can keep their run alive, their expanding valuations should provide gas to private SaaS shops looking to go public or fundraise.

What happens to tech stocks dribbles backward into private valuations. And since so many venture-backed startups are SaaS-built, how their public cohort perform is critical to understanding the VC market, for example.

Can tech shops with scary losses hearten the market?

There are a good-sized chunk of public tech, and growth-oriented companies that have steep losses that we keep tabs on. I’m thinking about the and the of the world. These are firms with interesting products, possibly bright futures, and outsized deficits. You could throw in there too, for example.

How the market deals with their continued losses will provide a signal to private companies concerning their burn rates, specifically how sharp losses could ding their future value.

Will Uber and Lyft manage to change their narrative?

In a similar, yet distinct vein, how and perform after earnings will be interesting.

If Uber and Lyft do well, and show investors that they have a real path to profitability, the of the world could enjoy a sentiment bump. If so, more money could be made available. Of course, the opposite is also true. If Uber and Lyft struggle, all sorts of transit-based startups (! ! All of them!) could suffer.

Crunchbase News may provide notes on the earnings results from the two big American ride-hailing companies given how many tens of billions of dollars of private companies exist in their niche.

Finally, will the recently-public tech companies perform well?

Finally, the recently public. As I am sure you’ve noticed from our endless coverage of the 2019 IPO market (more here, and here, from this week), a bunch of companies that we cover are going public this year. So many it’s actually warped our coverage away from earlier-stage firms towards a more late-stage focus.

The deluge of debuts is not done. There are a host of companies that still need to get out before the IPO window closes for all companies but the very best. That means that there are a lot of startups, backed by hundreds of millions of venture capital dollars, who are hoping for a positive quarter from the newly-public.

Embarrassing results from Fiverr or Luckin or Fastly (our list here) could limit appetite for new offerings. That could lower valuations ranges, and perhaps even delay some IPOs. That would be a big yuck for the entire Silicon Valley (broadly) ecosystem.

And that’s just a bit of what we’re watching out for. It’s going to be a fun few weeks. .

Illustration: . Data and chart: .Ìý

Please excuse the personal note, but I’m back online after a week of not being around. I even took a few days off of Twitter, meaning that I all but stopped being alive last week. It felt alright.

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Regardless, I am in catch-up mode this morning, and we need to get back on our IPO grind. So, without any more self-indulgence, here’s the latest regarding technology debuts:

• Domo’s valuation cut to size.ÌýAfter its IPO filing flopped, hit the brakes on its valuation. Per , Domo’s gives the firm a midpoint valuation of just $511.6 million. That’s down from its last private valuation of (post-money). The company is also now shooting for a valuation that is smaller than the pile of money that it raised () as a private shop. Maybe the public markets are more efficient than we thought.
• Xiaomi’s IPO shoots for big money.ÌýThe famous Chinese tech company’s IPO may raise $6 billion in a Hong Kong debut, . The same report notes that revenue grew around 70 percent last year and that its “operating profit more than tripled to 12 billion yuan ($1.9 billion)” over the same time period.
• Meituan’s IPO filing reveals epic losses, huge revenue growth.ÌýThe other epic IPO in the offing, has a different profit profile. Indeed, the company’s $5.2 billion in 2017 revenue (+161 percent ) came with a hugely expanded $2.9 billion loss. That’s up over three times its 2016 loss, per the company’s . However, the company’s reported adjusted losses are falling. So, there’s that.
• Elastic files privately. Finally, Elastic has privately filed to go public, . The firm will shoot for a “valuation between about $1.5 billion and $3 billion” when it goes out, a premium on its last private valuation. More on Elastic .
• The automotive three. On the outer-edges of what counts as tech, we have these three companies. (filing) is a China-based used car auction platform that has . Ìý() is an online auto insurance shopping service that raised less than $40 million. And Ìý() is a platform that lets people rent their rides to people looking to provide them to others using Uber and Lyft. Per , these three are among next dozen or so companies to go public domestically.

Considering the current IPO pace, I’d expect more of the same until markets turn.

The IPO market’s , and the . Hell, Adaptive Insights even . The getting is good right now for tech debuts and every private investor needs liquidity. The only real question at the moment is how long the good times will last, and what will happen to companies that miss the window.

From The :

• In a bid to bolster returns from advertising on its video and TV content, AT&T is buying digital ad platform  in a deal reportedly valued at around $1.6 billion. New York-based AppNexus, founded in 2007, previously raised more than $320 million in venture funding.

• , the largest service booking app in China, has filed for an IPO in Hong Kong. The company, which ranks as China’s fourth largest unicorn, plans to raise at least $4 billion in the offering.

• ±õ²Ô»å¾±²¹â€™sÌý, a fast-growing online insurance provider and lending marketplace, raised over $200 million in a new financing led by SoftBank.

Pet startups fetch record sums

• People are spending more on their pets than ever, and venture investors have taken notice. Funding for pet-related startups has been surging for several years and it looks like 2018 will set a record, led by big rounds for dog-walking and pet-sitting services.

Immigrants lead about half of top-funded US startups

• Roughly half of the most heavily funded U.S. unicorns count an immigrant as a founder or chief executive, a Crunchbase News analysis finds. The numbers hew pretty closely to overall stats for immigrant leadership at well-capitalized startups.

Domo’s  was met with a that when the filing was made public last week.

The document often serves as a moment of pride for companies looking to abandon youthful indiscretion and submit to the rigor of regular public disclosures. For Domo, however, it was : Yes, we spent all the money that we raised. No, we aren’t as big as you might have guessed. Yes, our GAAP net losses are high. But so is our cash burn!

You get the idea. But in light of of the issues inherent in granting the company’s founder and CEO nearly complete voting control of the firm, it’s worth us exploring what that founder-friendliness got the host of investors who poured capital into the technology company

(Domo, , claims to be “an operating system that allows you to run your entire business on your phone.” Domo’s service collects a firm’s data, which is then compiled and displayed in a visual format on mobile devices.)

So what did investors get for a , a $10 million , a that at more than $50 million, a , a , and a that went on from to and totaled around $441 million?

For its total external capital raises of nearly $700 million, Domo delivered this:

• Trailing twelve-month revenue of $95 million through the quarter ending April 30, 2018.
• ARR of $106.7 million, calculated by multiplying the firm’s subscription revenue during the April 30, 2018, quarter by four.
• An accumulated deficit of $803.3 million as of April 30, 2018.
• Long-term debt of $96.1 million.
• Operating cash burn of $148.7 million in its fiscal year ending January 31, 2018.
• Operating cash burn of $36.9 million in the quarter ending April 30, 2018.
• And total cash on hand of $71.9 million as of April 30, 2018.

So how bad is all of that? Pretty bad. One quick perspective for fun: Domo’s quarterly sales and marketing spend is higher than its revenue and has been in every single quarter that the firm reported in its S-1.

Domo is, therefore, an inefficient company. But how inefficient compared to other companies? Let’s take a peek at a few VC-approved metrics to get our hands on Domo’s operating results.

I promise this will be fun.

Magic, 40, And Hype

Since the company generates over 80 percent of its revenue from subscription software, we will use three simple SaaS metrics to determine the health of Domo: the Magic Number, the Rule of 40, and the Hype Factor.

To keep square and tidy, we’ll use definitions written by venture capitalists themselves to make sure that I’m not stacking the snark deck.

Magic Number

The Magic Number is a way for SaaS companies to figure out their sales efficiency both quickly and simply. Here’s Ìý´Ç·É²Ô Ìý´Ç²Ô :

Looking at SaaS deals over the past ten year at Scale, we have found that a simple calculation is highly predictive of which companies have a profitable subscription business model and which ones do not. Take the change in subscription revenue between two quarters, annualize it (multiply by four), and divide the result by the sales and marketing spend for the earlier of the two quarters.

That’s simple enough. Crunchbase News calculated Domo’s Magic Number using the above definition and Scale’s own calculator, , to generate two results: one inclusive of the firm’s full revenue and one only using its subscription revenue. In the case of the former, Domo’s magic number came out to 0.2; in the latter, it rose to 0.3.

How does that compare to what’s good and bad? Here’s the second half of the paragraph from Scale that we just quoted:

A result greater than 1x, has proven to be a compelling business investment, a result below .5x is a company that still has not figured out it’s model, and a result in between, is a deal that will probably get to success and cashflow breakeven but only in a relatively capital in-efficient way. We called this the Magic Number.

So, by that metric, Domo’s Magic Number is pretty poor.

Now, later-stage companies can have lower sales efficiency compared to their younger rivals. That point is made well . However, even that caveat doesn’t really change the fact that Domo’s sales and marketing spend is simply staggering compared to its revenue growth, per the venture capitalists’ own public metrics.

Update: Per , Omniture’s Josh James deserves a note for the Magic Number.

Rule of 40

Moving on, let’s talk about the Rule of 40. It’s a way for companies to figure out if they are burning too much to grow. Here’s , a smart cookie in my experience:

The 40% rule is that your growth rate + your profit should add up to 40%. So, if you are growing at 20%, you should be generating a profit of 20%. If you are growing at 40%, you should be generating a 0% profit. If you are growing at 50%, you can lose 10%. If you are doing better than the 40% rule, that’s awesome.

Feld notes before the above definition that the Rule fo 40 is “for SaaS companies at scale,” which is, by his assessment, “at least $50 million in revenue.” Domo fits that bill, as we saw a bit ago, so we can Rule of 40 it and get a result that we can trust.

But what counts as revenue is tricky as Domo is a mix of services and subscription. Happily, Feld has some good notes on how to handle that, stating that year-over-year MRR growth is the best way to calculate revenue growth for a Rule of 40 test.

The closest we can get to that is year-over-year quarterly subscription revenue growth. This is slightly more conservative than looking at MRR year-over-year as we’re counting in two smaller months as part of the quarter, something that we need to keep in mind.

Now, profit. How should we calculate that? Sadly, Feld recommends that we use EBITDA (with caveats for infrastructure spend). That’s tough as Domo doesn’t break out EBITDA. To compensate, we will use two other numbers that do something similar to EBIDTA, namely strip out some costs to get a more flexible definition of profit: operating profit and operating cashflow.

We’re picking operating losses as it is slightly less strict than net loss, and operating cashflow is an even looser metric that is cash-centric. It’s a way to approach accounting that some SaaS folks prefer.

That in hand, here’s the set of figures that we’ll use:

• Domo subscription revenue, quarter ending April 30, 2017: $19.103 million.
• Domo subscription revenue, quarter ending April 30, 2018: $26.663 million.
• Year-over-year subscription revenue growth (stand-in YoY MRR expansion): 39.6 percent.
• Domo operating income as a percent of aggregate revenue, quarter ending April 30, 2018: -134.6 percent.
• Domo operating cashflow as a percent of aggregate revenue, quarter ending April 30, 2018: -115.5 percent.

(We used aggregate revenue to compare operating income and cashflow to be conservative. By comparing the company’s faster-growing revenue source (subscription) growth to its percent losses calculated against its broadest revenue result, we’re giving Domo the best shot that we can at meeting the Rule of 40.)

We can now add our revenue growth rate of 39.6 percent to our two selected profit metrics of -134.6 percent and -115.5 percent to see if we get to +40. Adding them we get -95.0 and -75.9. Those are dramatically under +40.

This metric took more work to figure out, but given the goshdarn scampering miss from Domo, I think we can rest safely. Even if we made a small error in our logical progression, by this measure, the firm is still too damn unprofitable.

Hype Factor

Finally, let’s explore the idea of hype. Our prior two metrics were technical-ish attempts to get under the skin of Domo as a SaaS company

Here is where we are doing something a bit different. To explain hype, , a CEO, investor, and SaaS-world-participant:

In terms of hype, one metric I use is what I call the hype ratio = VC / ARR.Ìý On the theory that SaaS startups input venture capital (VC) and output two things — annual recurring revenue (ARR) and hype — by analogy, heat and light, this is a good way to measure how efficiently they generate ARR.

You can see where this is going. Here’s Kellogg on the results:

Domo’s hype ratio is 6.4.Ìý Put the other way, Domo converts VC into ARR at a 15% rate.Ìý The other 85% is, per my theory, hype. You give them $1 and you get $0.15 of heat, and $0.85 of light.Ìý It’s one of the most hyped companies I’ve ever seen.

We checked his math using our above-listed ARR result for Domo, and its capital raised to date () and got a hype ratio of , rounded. So we agree with his results.

Hype!

The Three Metric Problem

Domo’s Magic Number tell us, at the moment, its sales and marketing spend is inefficient. That conclusion is backed up by Domo’s Rule of 40 calculation, which is deeply negative. That result is unsurprising; who would have expected an expensive and inefficient sales process to lead to profits? And, finally, the firm’s Hype Ratio shows how the firm spent the money that it managed to raise. Much hype, little ARR, which fits into our prior results.

And that’s why the firm’s S-1 dropped with the dull thud of a steak onto wet cement. Yuck.

Top Image: iStock VOLHA RAMANCHUK