IPO-Bound Hortonworks Drops Out of Billion-Dollar Startup Club
By Deborah Gage
Wall Street Journal
3:19 pm ET, Dec 1, 2014
Hortonworks Inc., one of several companies commercializing the big data software Hadoop, appears to have dropped out of The Wall Street Journal’s Billion Dollar Startup Club.New regulatory paperwork filed in connection with the company’s planned initial public offering shows an implied valuation of less than $600 million, significantly lower than what the company reported in March, when Chief Executive Rob Bearden told Venture Capital Dispatch that Hortonworks had raised a $150 million Series D round at a valuation of more than $1 billion.
BlackRock and Passport led that round, with Benchmark, Dragoneer Investment Group, Tenaya Capital, Index Ventures and Yahoo participating.
Hortonworks was valued at roughly $1.1 billion, on a fully diluted basis, after its most-recent fundraising round this summer, said Virginia LaSala, an analyst at Renaissance Capital LLC, which manages IPO ETFs.
Hortonworks’ estimated valuation in Monday’s filing is lower in part because Hortonworks completed a one-for-two reverse stock split on Nov. 25, according to the filing. That effectively reduced the value of earlier investors’ stakes by half.
The company declined to comment on its valuation. Benchmark and Tenaya Capital did not immediately respond to requests for comment, and Index Ventures and Passport Capital declined to comment. Other investors include Hewlett-Packard and Teradata.
In March, Mr. Bearden also said he expected Hortonworks to exit 2014 with revenue “at a strong $100 million run rate.” The company fell short of that pace in the third quarter, showing revenue of $12.8 million, about half of a $100 million run rate. For the first nine months of the year it showed revenue of $33.4 million, compared to $15.9 million for the same period last year, according to regulatory documents. Losses grew to $86.7 million from $48.4 million for those same periods.
When calculating gross billings rather than revenue—a metric many enterprise software companies say more accurately reflects their financial strength—Hortonworks shows $53.2 million through the first nine months of this year, up from $24.4 million in the same period last year.
Hortonworks is among a group of companies using Hadoop to help corporate customers store and process enormous amounts of data. Cloudera, its main competitor, has raised more than $1 billion from investors including Intel Corp. and reported a valuation in March of about $4.1 billion.
Enterprise software companies hit a rough patch around that time, as public valuations for some prominent companies in the sector declined. Cloud storage company Box Inc., among the most high-profile venture-capital-backed startups, reportedly delayed its IPO amid the weakening demand and increased scrutiny of companies without an immediate path to profitability.
Hortonworks investors include Benchmark, BlackRock Private Equity Partners, Dragoneer Investment Group, Hewlett-Packard, Index Ventures, Passport Capital, Tenaya Capital, Teradata and Yahoo. Index and Passport declined to comment. Tenaya and Benchmark did not immediately respond to requests for comment.
The new regulatory filing by Hortonworks estimates the company will sell 6 million shares in its initial public offering at $12 to $14 per share. Assuming that shares would price at the higher end of the price range and excluding stock awards, that implies a valuation of $592.2 million.
In March, Mr. Bearden said he expected to company to go public in 2015.
–Elizabeth Dwoskin contributed to this report.
UPDATE 12/1/14: This story was changed to clarify the reasons for the company’s declining valuation.
Write to Deborah Gage at deborah.gage@wsj.com. Follow her on Twitter at @deborahgage
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