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Out of Stealth Mode To Decacorn Status in Just Over 5 Years - How Did Startup 'Snowflake' Get Rocket-ship Growth?


In early February, San Mateo, California-based cloud data-warehousing startup 'Snowflake Computing' had its series-G funding round. In the mega venture funding round, it raised a whopping $479 million on a gigantic $12.4 billion valuation. This was almost triple that of the company's previous (October 2018) valuation, and it took place amid the initial phase of the coronavirus emergency. Chief Executive Frank Slootman suggested- the series-G round had set the stage for a megahit initial public offering.

Snowflake's Clandestine Beginning

Snowflake was formed in 2012 by Benoit Dageville, Thierry Cruanes, and co-founder Marcin Zukowski who joined in January 2013. All three of them love snow sports, but the name they selected was also aligned to their startup in other ways - Snowflakes are "born in the cloud", and "each snowflake is unique". The result today is the most complete cloud data warehouse out there.

Cofounders Benoit and Thierry previously worked as data architects at Oracle Corp., and Marcin had come from a background of being a former academic and co-founder of Netherlands-based startup - Vectorwise (a database software company). As a result of his Ph.D. research, Marcin is the inventor of vectorized query execution in databases. Their combined backgrounds are what strengthened their startup idea throughout its progression. Though Snowflake remained in stealth mode for the first two years, it rolled out publicly in 2014.

When Bromance Met Opportunity

Two boys from France, Benoit, and Thierry, both had a passion for big data and computer science and were also quite fond of each other. It was truly the start of something big when their common passion and bromance would combine to take up a startup opportunity that came their way.

In 2012, Benoit was given the opportunity by an early investor to re-architect a data warehouse in the cloud entirely from scratch. Benoit felt there was no way he could build Snowflake on his own. He then approached Thierry, because together they had amazing ideas and also because Benoit considers Thierry as the most optimistic guy he knows.

Things felt so right they immediately decided to quit their jobs, buy a printer and a whiteboard, and start working out of Benoit's apartment in San Mateo.

Basically, they repurposed a brand new architecture for the cloud. It is an architecture which is designed to support fault isolation, performance isolation, and elasticity of the cloud. What they wanted to do was to build a system that would adapt the resources that were used based on the demand, so that for customers, they would only pay for what they use and also so that the system would scale to infinity.

The way the company achieved rocket-ship growth was by raising money soon after its founding, modestly at first, then much more rapidly and in gigantic chunks. Investors from the initial funding rounds included Sutter Hill, Redpoint, Altimeter, Iconiq Capital, and Sequoia Capital.

That's the story of how two people with a shared passion for data built a cloud data platform from scratch that in many ways changed the world. Mostly, it streamlined how we store and analyze ginormous amounts of data.

Value Proposition & Traction

In 2014, Snowflake was spearheaded out of stealth mode and into the public eye by its then newly appointed CEO – Microsoft and Juniper veteran Bob Muglia. In his first four years in charge, Muglia grew the company to an impressive valuation of $1.5 billion.

Muglia attributed the gigantic growth to the following core value proposition:

"The product does more of what customers want at a small fraction of the price of competing products from Oracle and SAP."

The product features & pricing strategy that got it such growth:

The startup rapidly gained traction by providing cloud-based data storage and analytics service (data warehouse-as-a-service). Using cloud-based hardware and software, enterprise users were able to store and analyze data. What made it all so special is the product's multi-dimensional elasticity, allowing users to use the service as much or as little as they want. This meant users had the power to easily increase or decrease the amount of storage or computing power and pay as per usage. The service also took care of most of the administration issues.

The startup had achieved unicorn status in early 2018, which is just four years into Muglia's leadership. By then it had around 1,000 customers, including among others: Adobe, Capital One, and Sony Pictures. These large companies benefited from the service to bridge the gap between old school storage data systems and the more efficient cloud computing; by transitioning huge loads of data quite easily through Snowflake.

The product today - A virtual data lake:

Today, Snowflake is one of the hottest growth brands in Silicon Valley. Functioning as a virtual data lake, it continues to sell its blockbuster cloud computing-based technology for storing and analyzing data. Users securely access data and apps in a cloud-neutral environment that is highly convenient and functional for large enterprises.

The company holds several patents to its credit (in database architecture, data warehousing, and other areas), and its tools share data across cloud computing services provided by (AMZN), Microsoft (MSFT), and Alphabet's (GOOGL) Google.

Revenue growth & customers:

According to current chief executive Frank Slootman, the company wrapped up the last fiscal year reporting revenue growth of 174%, making it by far the fastest-growing company out there. At the onset of the new fiscal year, the company had achieved 3,400 active customers, including 500 new customers that were added in the last quarter of the last fiscal year itself. Among its customers are companies like Netflix, Office Depot, DoorDash, Netgear, Ebates, and Yamaha.

Further growth & globalization (through a strong sales & marketing foundation):

Snowflake's aggressive growth goals were met by their ability to scale Sales and Marketing. Growth through effective Sales & Marketing became the leverage required to secure funding for further growth and globalization.

Key components of Snowflake's Sales & Marketing foundation:

  • A Focus on Key Accounts - The company’s Marketing team worked with Sales to define their Ideal Customer Profile (ICP). This set of criteria helped aid the final selection of target client accounts most likely to buy and drive strong lifetime value.
  • Intelligence and Measurement at the Account Level - By deploying lead-to-account matching technology (within their CRM database), Snowflake was able to understand which individual contacts belonged to which target accounts. They also implemented engagement tracking – measurement of how all potential buyers (at target accounts) interacted with both Sales and Marketing touches.
  • Tiering Accounts and Prioritizing Accordingly - Based on their understanding that not all target accounts are equal, Snowflake prioritized target accounts into tier-1 and tier-2 classifications. Tier 1 accounts get bespoke attention, customized plans, and deep research. Tier 2 accounts don’t get completely customized plans, yet they get highly relevant touches.

Owing to the combination of these reasons, their growth rate far exceeded their original goals. Leveraging this, they were able to implement a high-functioning ABM (Account-based Marketing) program that sky-rocketed sales in a continuous motion. Through this process, they raised $450 million (Series-F) in 2018, to fund additional growth across the globe. Their latest round of funding was in early 2020, bringing them to Decacorn status.

Coronavirus and the Way Forward

According to forecasts by the research firm Gartner, by 2022, about 75% of all databases will be deployed or migrated to cloud platforms. Gartner research suggests Snowflake's business model is evolving in correlation to recent industry acquisitions.

Snowflake's Decacorn status and gigantic valuation have set the stage for an IPO. Yet, amid the current coronavirus crisis, a Snowflake IPO may or may not be the company's next big finance event of 2020.

According to chief executive Slootman, the Covid-19 crisis will throw light on cloud projects as many companies are striving to set up work-from-home arrangements for their employees.

Many companies, not just health-care companies, are rushing to understand the impact of Covid-19 on their businesses.

Companies like Snowflake have become beneficiaries of bad things happening (like the Covid-19 emergency) in the world since other companies (existing and potential customers) need a platform to help them understand what's happening to their business and what steps to take.