HashiCorp’s IPO will place it among the most richly valued open source tech companies

The HashiCorp IPO intends to shoot the narrows between Thanksgiving and Christmas, with its first IPO pricing interval set to give it among the richest valuations of any technology company with a strong open source component to its core business.

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In a recent S-1/A filing, the cloud infra management company indicated that it expects to sell shares in its public offering at a range of $68 to $72 apiece. That interval could move, of course, before the company prices. Nubank, for example, reduced its IPO price range this week ahead of its anticipated debut.

At the upper end of HashiCorp’s price range, using a fully diluted share count, the former startup will land among the most richly valued tech companies in the world that sport a reliance on open source code. The company’s debut, then, will put points on the board for more than just itself when it does trade. (For more on the company’s economics, head here.)

Let’s talk about HashiCorp’s IPO valuation range, as well as how it stacks up to other public tech companies with robust revenue multiples.

What’s HashiCorp worth?

HashiCorp’s IPO valuation at its current range can be calculated in one of two ways. The first employs a simple share count, or the number of shares that are currently anticipated to be outstanding after its debut. The second is a fully diluted share count, which includes shares that have been earned through options but not yet turned from pledges into shares.

The company expects to have 178,895,570 shares of Class A and B stock in circulation after its IPO. HashiCorp’s simple IPO share count rises to 181,190,570 if we count shares reserved for its underwriting entities.

Using the latter figure, at a $68 to $72 per-share IPO price interval, HashiCorp would be worth between $12.3 billion and $13.0 billion.

However, on a fully diluted basis, the company’s value is much higher. Per Renaissance Capital, at $70 per share, HashiCorp’s IPO, inclusive of a broader share count, would value it at $14.2 billion. Converting that to $72 per share, the company could be worth as much as $14.6 billion.

The unicorn was last valued at around $5 billion in March 2020, meaning its IPO pricing looks set to be a win.

Is $14.6 billion a lot?

Yes, but not more than is perhaps reasonable, given today’s market dynamics.

Per its latest filing, HashiCorp had revenues of $82.22 million in its most recent quarter, or a run rate of $328.9 million. At a $14.6 billion valuation, the company has a present-day run-rate multiple of around 44x. That is high, but not insane given where other companies are trading.

In the three months ended October 31, HashiCorp grew 49% year on year. Per Bessemer data, Shopify’s growth rate is similar (46.4%), as is its revenue multiple (42.4x current run rate). So, you can construct an argument that HashiCorp deserves its 44x revenue run rate multiple, if you’d like. It wouldn’t be impossible to make an argument that it’s a bit rich, but, hey, this is 2021 and no one is doing that.

The debuting company is no mere SaaS unicorn, however; it has a strong open source component to its business. As HashiCorp wrote in its IPO filing:

Unlike traditional proprietary software, the core of all HashiCorp products is developed in open source.

This matters because the open source model is gaining traction with startups, based on TechCrunch’s read of the larger private market technology industry. And HashiCorp’s IPO revenue multiple appears to be among the highest for companies that employ an open source model.

There are only six public companies (using Bessemer data, to be clear) that have a higher run-rate multiple. They are, from low to high, Datadog (52x), Asana (56x), Zscaler (62x), Bill.com (64x), Cloudflare (88x), and Snowflake (96x).

Of that group, I think only Datadog really qualifies as open source in the same way as HashiCorp. (The company’s website notes that its “libraries and software that run on your systems are open source,” for example). That means that, by our loose reckoning, that after its IPO, HashiCorp is slated to be the second-best-valued open source public company on the planet.

Though, of course, there’s nuance to the point, depending on how you define “open source” and the precise method of calculating multiples. Still, it’s fair to say that HashiCorp’s IPO will set one of the highest multiples for public OSS companies. And that’s good news for startups following in its open source footsteps.

More when the company prices or sets a new IPO price range.