As data grows and becomes more complex, dealing with it becomes a daunting task. However, with the help of modern data tools, managing data, visualizing it, and studying it has become somewhat easier. Technology giant Microsoft’s Power BI is one of many business intelligence software in the market that can help businesses visualize and analyze data effectively. However, many startups have surfaced recently with unique software offerings that have managed to make a mark on the data management market. And, with the growing traction, many business software companies have recently decided to go public. Elastic is one such company.
With its impressive array of subscription-based software called the Elastic Stack, it has already been adopted by tech giants like Dell, Netflix, Adobe, and Uber. The company, founded in 2012 in Amsterdam and based in Mountain View, Calif., offers powerful open source products that can help clients in a wide variety of use cases. These use cases include search at application, site, and enterprise levels, logging, metrics, Application Performance Monitoring, business analytics, and security analytics. Elastic held a successful IPO on Oct. 5, and its stock is trading on the New York Stock Exchange under the ticker symbol ESTC. It raised a better-than-expected $252 million in the IPO, with its stock rising nearly 95 percent on the first day of trading.
Flagship product
Elasticsearch is the company’s flagship product and is referred to as the “Heart of the Elastic Stack” by the company itself. It’s a RESTful search and analytics engine and data store that allows users to build upon it and search their own data. Elasticsearch can be accessed through various programming languages like Java, Perl, Python, SQL, Curl, C#, PHP, JavaScript, and Ruby. Users can query data in Elasticsearch to search from billions of records of data of any kind, including metrics, structured, unstructured, and geospatial data. The powerful search engine is horizontally scalable and hence adapts to complex clusters very easily. It’s spread out over distributed environments which helps with automatic failover of nodes and ensures that clusters and data safe.
From finding Uber drivers near you to helping run the algorithms to find matches for you on Tinder, Elasticsearch has an impressive list of real-world use cases. However, the Elastic stack includes other powerful products and tools as well. Let’s take a look at them.
Kibana offers a user interface to manage and configure the Elastic Stack. It provides users with a visualization layer of data present in the Elasticsearch. This console helps provide users with comprehensive visuals to analyze and navigate data.
Beats is a set of data shipping plugins that sit on a server and help in transporting data from an edge machine to Elasticsearch and Logstash.
Logstash is an open source, server-side data processing pipeline that gathers data from a variety of data sources and performs ETL operations on the data. It routes data to multiple locations enabling users to send specific data to a data stash of their choice. As data can be distributed over a number of data sources and nodes, Logstash helps gather that data and transform it with great ease.
A growing user base
Elastic’s user base is snowballing at an impressive rate. In the SEC filing, Elastic states how its users are increasing as companies are relying more and more on the Elastic Stack and more developers are using it. “Our customers often significantly expand their usage of our products over time. The expansion includes increasing the number of developers using our products, increasing the utilization of our products for a particular use case, and applying our products to new use cases,” Elastic says.
Elastic’s products have been downloaded over 350 million times by the end of its fiscal year 2017-18 on July 31. In terms of revenue, Elastic has a period-over-period growth of 79 percent with $56.6 million in the last three months ended July 31, 2018, as compared to $31.6 million last year. A year-over-year growth of an impressive 81 percent was recorded with $159.9 million in revenue generated in fiscal year 2018 in comparison to $88.2 million in 2017. More than 91 percent of total revenue generated in 2017-18 is from paid subscribers. Elastic has incurred a loss of $52.7 million in 2018 compared to $52 million in 2017.
Elastic disclosed its growth strategies in the SEC filing. It aims at making its software and solutions easy to use as it wants to grow its customer base and its open source community. It also intends on expanding its strategic and regional partnership, making strategic investments, and pursuing selective acquisitions. Elastic has partnerships with Google and Alibaba, both of which have implemented Elasticsearch in their clouds whereas Microsoft and IBM have introduced templates to easily deploy Elasticsearch. For its existing customers, it wants to deliver larger deployments and new use cases. Elastic also wants continued investments in its technology. It has raised a healthy $162 million from just four rounds of funding from several investors including Benchmark, New Enterprise Associates, Index Ventures, and SV Angel.
Elastic is one of the latest in a long line of business software companies going public in 2018. This year saw a surge in IPOs with Zuora, Domo, Mulesoft, and DocuSign all going public. Elastic faces immense competition from cloud providers like Google and Amazon. It cites Google as a competitor in the search market as well. Search engines like Endeca, Solr, and FAST are also considered as competitors by Elastic. Splunk, another big analytics company, is competition for Elastic in the domain of data analysis, logging, and application performance monitoring.
No Elastic-Amazon partnership
Amazon introduced its own Elasticsearch service back in 2015 and Elastic says that it doesn’t have any partnership with Amazon. According to Elastic, the limitation of open source software is that it’s readily available to anyone who wants to use it and even though Amazon’s product shares the same name as Elastic’s flagship tool and is based on its open source components, it is not supported by Elastic and doesn’t include any of the Elastic stack’s proprietary features. “We make our Elasticsearch service available on Amazon Web Services, or AWS, for direct purchase via our website. Elastic’s Elasticsearch service is a different offering than Amazon Elasticsearch service. We do not partner with Amazon, provide support for Amazon Elasticsearch service, or provide Amazon or customers of Amazon Elasticsearch service with access to any of our free or paid proprietary features,” Elastic says in the filing.
Elastic is expected to raise around $193 million by offering 7 million shares. With its shares priced between $26 and $29, Elastic is looking at a massive $2.4 billion valuation. Goldman Sachs, JP Morgan Chase, and Barclays are joint bookrunners on this deal.
With so many business software companies going public in recent months, a lot of other factors need to be considered in order to be successful. In this fast-moving market, innovation is the key. As Elastic stated in its IPO, they wish to improve the ease of use and expand their customer base. Elastic has gained traction because of how they provide time-saving solutions for searching through data. Today, speed and scalability are more important than ever. And, with the increasing complexity of clusters and data, it is extremely vital for companies like Elastic to keep up the pace and provide efficient real-time solutions in order to stay relevant. So, with this IPO marking the start of a new journey for Elastic, it will be exciting to see how the open source software company innovates and grows.
