Tech Companies to Know in 2022
No industry has been hotter than the tech industry over the last 15 years. There’s been the rise of Facebook and social media, the global move to smartphones and mobile apps, the blockchain and cryptocurrencies, the mass rollout of cloud computing, ride-sharing, and video streaming just to name a few major events within tech. The next 15 years could be even bigger for tech as companies begin to release offerings around artificial intelligence and machine learning, automation, robotics, autonomous driving, workflow efficiency, and web3.
Three tech companies investors should keep on their radar are Databricks, Airtable, and Mobileye. Databricks' database architecture and Airtable's update to the traditional spreadsheet have earned both companies huge amounts of private money and big valuations. And Mobileye's advanced assisted and autonomous driving technology has helped grow the company's value by 2x since being acquired. Here is a brief introduction to the companies, along with a few reasons to keep them on your watch list.
Founded in 2013, Databricks is an artificial intelligence powered data analytics company. Databricks helps businesses clean, store, and analyze data. What sets Databricks apart is its lakehouse architecture, which has a number of benefits including support for a wider variety of workloads, ease of data versioning and governance, cost-effectiveness, and reduced data redundancy.
Databricks has raised $3.6 billion in funding from investors, with its last money raise coming in August of 2021, where it raised $1.6 billion. Databricks is currently valued at $38 billion, making it one of the largest venture backed privately held firms in the U.S..
What’s to Love About It
Since the start of the COVID-19 pandemic the market for enterprise software has exploded. Companies spent $477 billion on enterprise software in 2019, and that number jumped 11% in 2020 according to Statista. Statista also estimates that spending on enterprise software could reach $752 billion in the coming years.
Databricks has been able to reap the benefits of the favorable environment. In 2021 Databricks' recurring revenue hit $600 million, up from $425 million in 2020. Currently, 40% of the Fortune 500 uses Databricks' platform, and the company has partnerships with over 450 international firms.
In 2021, Gartner recognized Databricks as a leader in cloud database management systems and in data science and machine learning platforms, making Databricks the only cloud-native vendor to be named a leader in both categories.
Databricks isn’t resting on past success, it’s looking to expand its reach, and has recently rolled out a version of its lakehouse intelligence tool for retailers. The new offering helped Databricks capture the business of Walgreens, Kroger, and H&M Group.
Databricks faces competition from Teradata, SnowFlake ($SNOW), Firebolt, Azure Synapse Analytics, Hadoop, and DataStage to name a few.
Founded in 2012 by Howie Liu after selling his first company Etacts to Salesforce ($CRM), Airtable has been described as Excel spreadsheets on steroids. Liu and his co-founders gave the basic spreadsheet that we all know a much needed update by mixing spreadsheets and professional database functionality, and the cherry on top, is that Airtable is a no-code / low-code platform. This means Airtable users don't have to be fluent in SQL and or in writing scripts to create powerful tools for their businesses.
As of late 2021, Airtable has raised over $1.3 billion, with the latest funding round bringing in over $700 million. The company’s value as a private company has been rising rapidly. After its last funding round in December the company was valued at $11 billion, nearly doubling its $5.7 billion valuation from March of 2021.
What’s to Love About It
Airtable's ability to plug and play makes it an incredible tool for teams and businesses. Mobile apps and web apps are mainly creating data, reading data, updating data, and deleting data, it's what programmers refer to as CRUD (create, read, update, delete). The ability to create, read, update, and delete data, without having to know a line of code is a big deal. Calling in professional programmers to create an app can cost thousands to hundreds of thousands of dollars. With Airtable, businesses can construct their own apps to meet an immediate need, saving time and money in the process.
Airtable relies on the “land and expand” marketing philosophy. This occurs when one person starts using Airtable to manage a team, a project, or desired output. That person introduces the product to their team and encourages the entire team to use Airtable. That team corresponds with another and introduces Airtable to that team. Once the desired goal is accomplished, the teams break up, the members join new teams with new missions, and if they enjoyed their Airtable experience they'll pitch the ideal of using Airtable to their new teams. Slack, the company that gained popularity by putting a new spin on email and workplace communications had success with the same approach.
Airtable is in the process of shifting its image to reflect that it can be used by large enterprises, and not just individual tinkerers and small teams.
All together Airtable has over 300,000 clients, which include Netflix ($NFLX), Spotify ($SPOT), and Tesla ($TSLA). 30% of Airtable users pay for the service, and the company’s annual recurring revenue is over $100 million. According to venture capitalist Peter Fenton, who invested in Twitter ($TWTR), Yelp ($YELP), and Cloudera, Airtable has the best retention numbers he’s ever seen.
Determining Airtable’s addressable market is a tough task, but sarca.com did a great job of doing so in the image below.
For enterprises or small teams that don’t need a dedicated CRM or dedicated marketing tool or dedicated project management tool, Airtable works just fine, which makes Airtable’s addressable market the white space between the dedicated enterprise software tools.
Notion Labs, Trello, Domino Data Lab, Asana, Smartsheet, Basecamp, Coda, Hubspot, ProductBoard, Workday, and Rows are some of Airtable's competitors.
Founded in 1999, Mobileye is a leading innovator in self-driving hardware and software. Over 100 million vehicles worldwide rely on Mobileye technology. In 2017, Intel acquired Mobileye for $15.3 billion, now worth close to $50 billion, Intel is planning to spin Mobileye off sometime this year.
What’s to Love About It
Market conditions are in Mobileye's favor. We are closer than we’ve ever been to true self-driving technology. The thought of self-driving vehicles is no longer stuff we only see in movies, there are a number of companies working on fully autonomous vehicles. Mobileye's revenue growth exemplifies the global move towards utilizing self-driving technology. In 2014, Mobileye generated $143 million in revenue, in 2021 the company brought in $1.3 billion in revenue, which marked a 40% increase from 2020. More than 25 automakers and 300 plus vehicle models depend on Mobileye technology.
Mobileye is also a data play. The Mobileye Roadbook is a database of high definition maps created by vehicles that are already on the road and equipped with Mobileye cameras and chips. This map provides the sensors found on autonomous vehicles with an ideal of what to expect on the roadway. Mobileye has ambitions of a robo taxi fleet, and having an up to date map of roadways and neighborhoods will be a big advantage against the many other companies that have aspirations of starting their own robo taxi service. Mobileye has plans to test its robo taxi service in Germany some time this year.
Google’s Waymo, General Motors’ Cruise, Nvidia, Argo AI, Pony.AI, Baidu, and AutoX are a few of the other companies that are working on self-driving technology.
Of the three companies covered Mobileye appeals to me the most. As a former claims rep for one of the major insurance companies, I know first hand how reckless and inattentive human drivers can be. If we can program cars to drive safer than a human, it will have a big impact on the auto industry, the insurance industry, the bodily injury litigation industry and a few other industries.
I also like the opportunities that Mobileye's Roadbook could bring. A trend has developed over the last few years, whenever a company mentions its work on autonomous vehicles, it also mentions the possibility of starting a self-driving taxi service. What those companies don't have is a database of maps that are being updated by millions of vehicles. Mobileye could make Roadbook a subscription service and market it to other robotaxi companies.
Databricks is a company I like and will follow closely. There is a belief by private investors that Databricks could have a Snowflake like stock market performance when it decides to go public. Snowflake's value was $33 billion when it went public in September 2020, Databricks is currently valued at $38 billion. Snowflake's stock has performed well for investors, the company went public at $120 per share, and hit $400 per share less than four months after going public. Snowflake currently trades at $311.11 per share.
Airtable is an interesting company, but not one I'd be quick to invest in. I like the product, I like the problem it addresses, and I like the no-code / low-code movement that it's a part of. However, Airtable reminds me of Slack, but with more competition.
Before being acquired by Salesforce, Slack's competition was traditional email and Microsoft's Teams. And though Slack was loved by its users, the stock's performance didn't live up to the hype it generated as a private company. Slack did a direct listing at a price of $26 per share, which valued the company at $15.7 billion. The stock soared 48% after going public, but then slowly traded down until it fell below its listing price. As Microsoft's Teams started to gain momentum, investors shied away from owning Slack. The stock was trading under $30 per share when Salesforce acquired the company for $27.7 billion.
I could see Airtable walking the same path as Slack, by going public, having a big debut, and then a slow sell off as competition heats up, and then getting acquired, or merging with another no-code / low-code platform that addresses a different problem.
Choosing the Right One
There is an abundance of investment opportunities within tech, and trying to figure out which company is going to be the next Apple, Amazon, Google, or Netflix can be a difficult task for an investor. In my own tech investing, if a company has very little operating history to analyze I ask myself these questions.
Does the Company Have a Moat?
A moat is a term coined by Warren Buffett, and it equates to having a competitive advantage that is difficult or impossible to duplicate. That competitive advantage can be superior tech, name and brand recognition, or a high degree of customer loyalty among other things.
Is the Tech SomethingThat People Just Use or Is It Something They Rave About?
People use email, but early Slack users raved about Slack. The same goes for Zoom, even before the pandemic, people that were using Zoom talked about it in a glowing manner. In contrast, GoToMeeting has been around since 2006, and I remember using GoToMeeting for a fantasy baseball draft back in 2009 or 2010, and after that day, I rarely heard anyone talk about GoToMeeting.
Is the World Moving Towards the Company?
This is a question that I've started to ask myself lately after looking back on my past investments. I had opportunities to invest in Tesla, Adobe ($ADBE), Nvidia ($NVDA), and Netflix ($NFLX) for under $20, but I was too focused on the now to think about the future.
When I passed on Tesla, Adobe, Nvidia, and Netflix, I was investing in companies that I believed would provide big returns over the next 6 to 12 months, but never thinking about the next 6 to 12 years. Some may say this is a hindsight is 20/20 kind of thing, which could be true, but if you consider someone like Cathie Wood of ARK Invest, I believe some of her big wins have come because she's thinking years out, and not quarter-to-quarter. The world has come to Tesla, the public wants electric vehicles that look good. When the world started the shift to smartphones, the demand for Adobe's product suite grew with the rise of the app economy and digital content creation.
These aren't the only questions I answer before considering an investment in a new company, but they're the ones I spend the most time thinking about and researching.
I can't guarantee that asking yourself these particular questions is going to get you into the next Tesla or Netflix at $20 a share, these questions are just a start, and can be used to create your own framework for selecting winning investments. Good luck.