Fastly, a startup which helps websites apps run faster, is expected to start trading Thursday on the New York Stock Exchange under the symbol “FSLY” in an initial public offering that could value the company as high as $1.45 billion.
It’s a small valuation in today’s IPO landscape, which just saw Uber go public at a valuation of $75.5 billion — an ultra-high price has since deflated considerably on the public markets in the days since its debut.
But Fastly represents a different type of unicorn tech startup than Uber. It’s a developer-focused company with a smaller valuation — one of a handful of IPO-ready startups in the space which could fill the coffers of bankers and investors alike once all of the headliners like Uber and Slack have come and gone.
The IPO is led by Bank of America Merrill Lynch, Citigroup, and Credit Suisse.
Here’s what you need to know about Fastly.
It’s more like PagerDuty than Uber
Fastly sells security and content delivery services to other large companies like the New York Times and Spotify, as well as Alaska Airlines and Microsoft’s GitHub.
Unlike Oracle or other legacy tech giants, which historically locked customers into contracts, or cloud subscription services like Salesforce, which make money on recurring monthly subscriptions, Fastly charges customers by how much they use its product. Indeed, most of its customers don’t have long-term contractual financial commitments to the company, according to its S-1 IPO filing.
Like the IT management company PagerDuty, which went public in April with a $1.76 billion valuation, or Zoom, which went public around the same time at a valuation of $9.2 billion, Fastly operates at a smaller scale, compared to some of the other 2019 IPOs.
At the end of March, Fastly had 489 employees headquartered out of San Francisco. Its customer base is also relatively slim. Fastly said that as of December 2018, 84% of its revenue is derived from 227 enterprise-sized customers. Its average enterprise customer accounted for $530,000 in revenue.
Its revenue is growing, but it’s not profitable
In terms of fundamentals, Fastly is growing quickly. The company generated $144.6 million in revenue in calendar 2018, up 37.8% from its $105 million in revenue in 2017.
Like other companies in its unicorn startup cohort, however, it’s still losing money. Fastly lost $30.9 million in the 2018 calendar year, down 4.7% from $32.5 million in losses in 2017.
The company was last valued at $925 million in 2018, according to PitchBook, after raising $40 million from Deutsche Telekom Capital Partners, Sozo Ventures, and Swisscom Ventures. Altogether the company has raised $220 million. Its most high-profile investors include Battery Ventures and ICONIQ Capital.
In its S-1, Fastly set a price range of $14 to $16 per share, which would give it an initial market cap of $1.45 billion if it prices at the high point — a significant uptick from that last private valuation.
While Uber raised $8.1 billion in its IPO, Fastly is looking to raise just $180 million. That’s about the size of an extra-large venture capital round, considering that a $100 million round usually corresponds to a $1 billion valuation.
New shareholders won’t have much power
Fastly was founded by CEO Artur Bergman in 2011, long after the incumbent Akamai started in 1998 and its more direct rival Cloudflare was founded in 2009.
The company will IPO with a dual class share structure which favors early investors and employees, similarly to the structures seen at Lyft and Pinterest. This gives the current leadership team near-complete control on the board level, leaving shareholders with a financial stake but little say over the future of the company.
One of the largest shareholders is Bergman, who owns 15.5% of the company. Investor August Capital owns 20.2% of Fastly, Iconiq owns 12.8%, O’Reilly AlphaTech Ventures owns 10.7% and Amplify Partners owns 10.6%.
Each of the parties mentioned above will retain about the same percentage of voting control once the company goes public since their Class B stock holds 10 votes for every one vote held by the Class A stock being sold in the IPO. In sum, Fastly’s current shareholders will retain 98.6% of the overall voting power at the company after it goes public.
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