In startup land, it’s easy to get distracted by the brightest lights. Some companies excel, earning the business equivalent of a halo, casting their own luminance. And then, of course, there are the implosions and crashes that kick off waves of photons that inevitably blanket our pages.
During the pandemic, companies like Zoom and Peloton earned (temporary) radiance. More recently, we’ve been captivated by the flashing warning lights coming from companies like Better.com, Fast and Bolt. We sometimes fail to balance our coverage of the dazzling with the less sexy but still noteworthy startup triumphs and tragedies.
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Today, we’ll attempt a corrective. On the other end of the newsiness spectrum are companies that grow consistently, don’t burn too much money — and therefore don’t raise too often — and stay busy doing things that don’t demand headlines.
Last year, these companies were forgotten as young startups with even flimsy product-market fit were able to raise staggering sums of capital while interest rates enjoyed their last few quarters near zero.
Things have changed. We’ve seen former darlings go through the wringer, the downfall of much of the SPAC class and some whole-cloth startup deaths.
But some private technology companies in less flashy markets didn’t fall prey to the 2021 hype cycle. Those companies are, in some cases, chugging along toward an IPO the moment the window opens again. And they haven’t gotten too much credit for their work.
Call it the revenge of the quiet companies.
Give us an example, yeah?
But of course. Back in the days of Box versus Dropbox, Egnyte competed along similar lines. Since then, Egnyte, much like Box and Dropbox, has worked to expand its product offering away from the cloud storage market to the point that it’s actually a bit hard to recall what it did to begin with.
Egnyte now offers security tooling, data controls, and compliance services. And, according to the company’s website this morning, it’s attracted some 16,000 customers. Not bad, yeah? Even more, back in 2017, Egnyte reached GAAP profitability.
Why haven’t you heard much about Egnyte in recent years? TechCrunch has covered it here and there, but not too often. This is not due to a lack of continued growth at the company; instead, Egnyte just hasn’t raised external capital since 2018, per PitchBook data. Back then, the company raised $75 million at a post-money valuation of around $460 million. TechCrunch covered that raise.
We should not be surprised that Egnyte did not raise more capital, because the company’s CEO, Vineet Jain, told TechCrunch at the time that it was his company’s last raise, adding that with the new capital, Egnyte had “more than enough funding to support a growth trajectory to IPO.”
Was that correct? Yep. Egnyte reached the $150 million ARR mark earlier this year — TechCrunch noted this milestone — putting it well above the required scale for a software IPO. And speaking of IPOs, Egnyte dropped the following bit of news a few weeks back:
Egnyte [ … ] today announced the appointment of Ravi Chopra as Chief Financial Officer[.] “After recently crossing the $160 million annual recurring revenue milestone, fueled by accelerating demand for our security and compliance offerings, we are pleased to welcome another executive with deep cybersecurity experience to our leadership ranks,” said Vineet Jain, Chief Executive Officer and Co-Founder at Egnyte.
Another $10 million in ARR and a CFO. That smells like an IPO the moment they are once again possible.
The backdrop for the Egnyte news is that companies in sectors that were hot last year, like crypto, are now suffering from a relatively sharp period of lump-taking. After raising at a valuation of $3 billion last year, crypto-focused BlockFi is now pursuing capital at one-third of that target, per The Block. Even more, The Block reports that BlockFi was “reportedly raising funds at a valuation above $5 billion last year.” From $3 billion to $5 billion to $1 billion? That’s the venture-startup hype cycle in action.
Egnyte, in contrast, is, well, doing the stuff it said it was going to without needing to ask the market for permission. It simply raised a big check when it could after getting its incomes and outflows into order, and then used the capital to grow well north of the nine-figure scale without making too much of a fuss. And it now has the executive team it needs to file and get out the door at what will be a huge markup to its final private valuation.
On that point, do you know what sort of revenue multiple you get when you divide $460 million by $160 million? 2.9x. That’s a number so low that even if the market drops further, Egnyte will be able to beat it.
Doing some back-of-the-envelope math, Egnyte could earn its unicorn horn in its IPO, which is sufficiently counter to the 2021 startup private capital boom that we might even call it punk rock. Or as punk rock as one can get in the enterprise file sync and sharing (EFSS) market.
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