HashiCorp’s IPO filing reveals a growing business, but at a slower pace

HashiCorp filed go public this week, becoming the latest addition to our growing roster of expected fourth-quarter IPOs.

The cloud infrastructure unicorn presents an interesting mix of open source and proprietary code, with recurring revenues and a nascent hosted product.

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To understand HashiCorp’s performance, we’ll need to spend a minute talking about how it approaches the market. If you are a fan of open source software (OSS) or curious how companies with a core of open code make money, it should be an interesting read.

In very broad terms, HashiCorp grew about 50% in its most recent quarter from a year earlier, but with narrower losses. The company has reached nine-figure revenue scale, meaning that the unicorn worth some $5 billion or so back in 2020 is going to make a splash when it lists.

No more throat clearing, let’s talk OSS, how it shakes out into a business model and how strong HashiCorp’s historical results appear through this July.

HashiCorp’s open source approach

When we wrote above that HashiCorp is a cloud infrastructure company, we meant it. It has built a suite of tools that help other companies manage cloud applications (Terraform), keep them and their data secure (Boundary, Vault), handle networking on a granular level (Consul) and deal with orchestration and cross-platform deployment (Nomad, Waypoint).

That’s an incredibly brief overview, but it should give you an idea of the breadth of the software that HashiCorp has built over the course of its life. We expected a good amount of code, frankly; this is a company going public after all, not some middling Series C startup with hopes of one day growing into a unicorn price.

Here’s where things get fun. Per the company’s S-1 filing, it has “deliberately built [its] products using an open-core software development model.” In practical terms, that means that all HashiCorp software products are “developed as open source projects, with large communities of users, contributors, and partners collaborating on their development.”

The Exchange has written some about how OSS has evolved from exoticism to in-market advantage in recent months. For investors just now picking up on the monetization possibilities that open source software can unlock in-market, HashiCorp’s IPO should be a klaxon that they are behind.

Regardless, how does HashiCorp make money from open source software? The company has built proprietary code atop its open source products that it sells, while also offering support and a hosted version of its products.

The company generates revenue in several buckets. The first and biggest bucket is subscription revenues. The second is professional services — this is generally understood, so we’ll leave it alone.