An IPO and a billion dollar valuation sounds like your company made it. Trust me, building a company from scratch and eventually selling it for a good deal of money, feels great. However, it also changes the game completely. We became a public company and after successfully growing and evolving our vision for how we could best continue to reshape the future of application performance, we decided to come full-circle and become private again. The experience we created with Dynatrace was a key driver for this decision. Here is why.
IPO or intent to please others
Other companies in the monitoring space might see IPO as the holy grail. New Relic just went public, and others might be about to charge ahead in this direction too. Our decision to become a private company again might appear to be a surprising move at first, but in reality it is quite the opposite. Once you have shareholders, your primary focus becomes fulfilling their expectations. Either they want revenue or they want growth. They want it quickly. At least one prominent VC firm, Benchmark, predicts many tech startups (aka: Unicorns) that have gone public will fail this year. “Unicorns” are ventures valued over $1B by venture capitalists, and as Bill Gurley of Benchmark observes, undue pressure that overly high valuations cause for companies can put them at real risk for collapse under their own overvalued weight.
Another downside of being public – there is no space for investing in long term innovation. Investors want a fast return on their investment. There is typically no patience for forgoing this quarter’s returns in favor of strategic planning to come out on top in the long run. This increases the perceived risk of shareholders’ investment dollars. Trust me, this is not what shareholders are looking for.
As a private company you can determine your own fate and you can work closely with one or two key investors on a long-term strategy. Investors in private companies understand that this investment is not about a short-term goal but about strategic innovation, leadership and long-term growth. This suddenly gives you a new universe of possibilities to build disruptive technology again to really change the landscape your competition thought they were playing in. So they’re working to find a way to start winning a game you’ve been dominating for the past few years – while you’re creating a new game altogether with new, expanded boundaries, new plays, and new potential for growth.
Going all in
Two years ago I convinced our board to build the APM solution the market will need in three years from now – Dynatrace. My roadmap clearly showed that we need a significant investment in building technology for the next years and to start growing a business from scratch.
The goal was to do this without putting our core business at risk. Remember shareholders don’t like this. Our board decided to set aside a reasonable budget, create a separate team and let us build technology of the future. Suddenly Dynatrace became a privately funded startup within Compuware, now Dynatrace.
We did what we do best. We started to build a product without the need to immediately create revenue. We let innovation be a top priority. We were able to take smart, calculated risks. We became fast and adopted the mentality of a startup that wants to change the world. Being able to focus on a new gen product only, we became faster and faster.
MVP vs. MDP
While most startups focus on building a minimum viable product (MVP) we decided to build our MDP – the maximum disrupting product. Our vision is simple. We build the APM solution that allows to manage web-scale applications with less than one full time resource. This requires us to execute on a massive technology roadmap. Managing this is more than a full time job and only not being distracted by organizational overhead makes this possible.
You might think, we will have to sell our product eventually – and we do. Over the last four months we have had incredible sales growth and are on our way to 100 customers. All this growth comes organically from companies who chose Dynatrace over other products. We even see people who used other competitive offerings for free and that are now paying for Dynatrace. This clearly shows that we are on the right path to create unbeatable value to our customers and we’re thrilled to have the freedom to continue realizing this vision.