When converged infrastructure company Nutanix raised a $33 million in Series C funding last year, analysts thought an IPO might follow. Instead, the company recently acquired upwards of $100 million in a Series D round, more money than any of its industry competitors had ever raised before in a single round. And though the company confirms a public offering is in the works, leadership has neglected to set a date. So why hasn’t Nutanix hit the market?
For any company delaying an IPO, there is a fear that beneficial market conditions won’t last forever, and neither will investors eager for returns. Any number of outside factors can cause the market to plummet overnight, and macroeconomic issues such as the fiscal situation in Europe and the U.S. Federal Reserve’s tapering all have the potential to spook investors.
Nutanix’s total funding far exceeds that of the average company that goes public. The company’s fourth and latest round of investment, co-led by Riverwood Capital and SAP Ventures with Lightspeed Venture Partners, Khosla Ventures and Battery Ventures contributing, saw $101 million added to an already vast funding pot, now totaling $172.2 million. According to Howard Ting, vice president of product and marketing at Nutanix, that puts a $1 billion valuation on the company, and investors will want to see vast returns at some point.
Nutanix operates in a competitive industry. The company offers a virtual computing platform for its clients, that allows clients to store their data on a flexible number of servers. Since Nutanix began selling its product, a box that merges storage and computing, two years ago, sales have cleared $100 million and the company has 13 million-dollar accounts.
Companies often go public to protect their real estate — meaning their customer base and technological advantage — and ensure challengers don’t beat them to the market and, by extension, massive returns. After all, major competitors and legacy vendors like Dell, HP and Cisco all offer customers options for converged infrastructure solutions. And in the time Nutanix takes to grow, another startup could approach the space from left field. But the company seems to feel it’s safe for now. “We are two years ahead of any of these guys,” says CEO Dheeraj Pandey, referring to competitors in a short video called The Nutanix Story published this month. “By the time they have a Nutanix-like copycat solution…we would have moved onto something else.”
If Nutanix really doesn’t worry about the competition, then it doesn’t need to be concerned about timing of an IPO so much either.The company’s growth rate and disruptive tech keep its competitive edge sharp. The first would decelerate and the second, fail to iterate, should Nutanix make an offering now. Today, the company expands so fast it seems to have left skid marks across the enterprise data center space. Ravi Mhatre of Lightspeed Venture Partners says Nutanix has grown faster than any other enterprise data infrastructure products startup in the last 10 years.
The company may not be able to afford any loss of speed as it enters competition in an entirely new weight class. Nutanix now confronts beefy (but bulky) legacy vendors like IBM, HP, Cisco, Dell, EMC and NetApp. Opponents may be better capitalized, but Nutanix offers what they can’t: change.
“They all have a converged offering,” says Howard Ting, vice president of product and marketing at Nutanix. “It’s duct tape, it’s glue. It doesn’t scale, it doesn’t perform, it’s much more costly, more complex to manage and deploy.” The company cuts the fat from the data center and helps customers launch web-scale business applications in the same style as Google, Amazon and Facebook, who developed their own specific and specialized data center tech. Nutanix delivers converged, software-defined infrastructure solutions to the masses.
But an inferior offering doesn’t stop competitors from spreading what Ting calls FUD (fear, uncertainty, and doubt) around Nutanix. With entrenched reputations and loud voices, legacy vendors question how long the company will last in the enterprise data center marketplace, and what customers will do if the company goes under. Nutanix must educate the consumer and battle bigwigs for market share. To go public while gearing up for a fight might be unwise.
Now backers provide support with capital that will keep Nutanix private and independent for 1-2 years. Though the company could become profitable within a couple of quarters, according to Ting, Nutanix is more focused on growth.
Nutanix doesn’t feel the need to go public just yet, nor should it. Instead, the company continues to develop and innovate off-grid at a prodigious clip. Luckily, the company won’t run out of road anytime soon. Ting gauges its market opportunity at between $80 billion and $100 billion. On average, VC-backed tech companies need seven years and $73 million in funding to go public. Three-year-old Nutanix has nearly $100 million more in backing than the average company; but age must come before many things, including money. Nutanix, now with plenty of cash, can afford to take its time.