As Egnyte continues to grow steadily, an IPO seems like the inevitable conclusion

Egnyte has never been a startup in a hurry and has been content to take a slow but steady growth trajectory over its 15-year history. Today it’s a $200 million company growing at around 25% a year. That’s pretty impressive for a private company at a time when many enterprise SaaS companies are struggling to reach double digits.

In a crowded storage, governance and security market, it has managed to chug along with solid growth, while avoiding flashy funding rounds of its competitors. Consider that Box raised over $1 billion before it went public in 2015. Meanwhile, Dropbox, which went public in 2018, raised even more at $1.7 billion.

Egnyte has raised a modest $137 million — its last fundraise was $75 million five years ago — and has yet to go public, not that it doesn’t want to at some point. That is still very much a goal of CEO and co-founder Vineet Jain, if the economy and the markets would ever cooperate.

“Fortunately for us, we have no valuation overhang. So that is not the constraint and on the overall business side, all the core KPIs whether it’s the dollar-based retention, profitability, improving profitability, the growth rate is still a very healthy 25%. And we’ve never been a flashy company,” Jain told TechCrunch+.

The company has built its business brick by brick, looking at niches like financial services, architecture, engineering and construction, and life sciences. This approach has served it well, not leaning on any particular industry.

The life sciences market has quieted in recent years, and Egnyte has been able to keep going while other areas have compensated for the slowing or lost revenue. Jain says his company hasn’t been immune to the vagaries of the economy of the last year or two, but he has managed to keep it profitable, steady and growing.

“Despite a tightening in spend from an enterprise buyer perspective, we keep finding multiple demand funnels, whether they’re industry specific or geography specific, so something ebbs, something else flows,” Jain said.

As the company looks to the future, going public will take care of itself at some point, but for now, he’s content to run Egnyte the old-fashioned way. Consider that it has been profitable over the last four quarters and is adding cash to the books, perhaps explaining why it hasn’t had to go back to the fundraising well five years after the last raise. The next funding event would appear to be that IPO, whenever that happens.

Slow, steady, and ready to list

When we consider late-stage startups, we generally worry about valuation overhang, stubborn burn rates, and a sluggish exit market. For a great many startups that saw their fortunes burn bright during the last boom, there’s ample concern about their health, viability, and exit value.

Egnyte is the opposite. It was quieter during the last venture boom, has not raised money since 2018 and has thus avoided the 2020–2022 private-market valuations spike, and is poised to exit at a multiple of its last venture valuation. Indeed, the company’s $460 million post-money valuation (per PitchBook data) is very modest in comparison to its annual recurring revenue of over $200 million, even at today’s far more conservative valuation norms.

Companies with growth rates around where Egnyte is today are worth around 9x to 10x their next year’s revenues, per Altimeter investor Jamin Ball. That would give Egnyte a valuation of around $2 billion, four times its last private price. Mix in the fact that Egnyte is generating cash and has a history of profitability and an AI strategy, and it could perhaps do even better when it goes public. And as Egnyte won’t go public for at least a few quarters — IPO skittishness remains pandemic in tech circles — it will have an even larger revenue base when it does. That could further extend its exit value compared to its 2018 venture valuation.

But while it is easy to say that the Egnyte approach to building a venture-backed business was the right way to go, it also took a very long period of time to pull off. Let’s rewind the clock.

A long history of sharing numbers

Back in December of 2013, TechCrunch pegged Egnyte’s revenue to be between $25 million and $40 million. Hell, the company shared its gross margins at the time (around 60%) and told this publication that it expected to reach cash-flow breakeven by late 2014.

The company’s revenue scale, and its ability to not always lose money — rare among software startups — had us wondering as early as 2015 if the company was a clear IPO target. Here, eight years later, we’re making the same supposition. The difference, of course, is how much larger Egnyte is today compared to the final years of the Obama administration.

By late 2016 and early 2017, the company had reached GAAP profitability. Its 2018 fundraise allowed it to pick up its spend (the company earmarked the money to bolster its growth rate), but with profitability in its past, we’re not shocked that Egnyte is once again back in the black.

Picking up the Egnyte history last year, the company told TechCrunch that it had reached $150 million worth of ARR in February 2022. By May it was $160 million. You can see how the company managed to reach annual recurring revenue of $200 million in early 2023 off those numbers.

Reading between the lines of Egnyte’s history, in retrospect, it may have tuned for profitability a little early and perhaps saw its growth rate sag during its middle-age startup years more than made sense. But its longer-term vision of profitable-ish growth no matter the macro environment made it an odd duck during the last venture boom, and today it’s a rock-solid enterprise SaaS company that is in great shape to provide its backers with a massive exit at a multiple of their last check’s price. That’s so rare today as to be nearly nonexistent.

You could argue that if Egnyte had simply gone public in 2021 it could have managed an IPO at a nice valuation premium even then. But how would that have fared since? Fill in the blanks yourself, but at least the company is not underwater from an IPO price that became impossible to defend in the intervening period.

We won’t know the final score until it lists, but for now Egnyte appears to be laughing last, even if its path to startup success did take longer than what was once considered the norm. When the IPO market does get going again, put Egnyte on our shortlist of companies whose S-1s are going to be read with real curiosity and very little anxiety.