Snowflake made its big debut on Wall Street Wednesday, jumping nearly 112-percent on its first day of trading. Snowflake CEO Frank Slootman joins Yahoo Finance’s The First Trade with Alexis Christoforous and Brian Sozzi to discuss the run-up to the IPO, his journey to this point, and much more.
Video Transcript
ALEXIS CHRISTOFOROUS: The cloud-based data management company Snowflake made its big debut on Wall Street Wednesday, jumping nearly 112% in its first day of trading, giving the company a market cap of over $70 billion. Now Snowflake did give back about 10% of its value yesterday. That's as tech stocks overall fell. But here this morning, we've got Snowflake on the rise again, up about 3%.
Joining us now is Snowflake CEO, Frank Slootman. Frank, thanks for making time for us. I know it's been a whirlwind of a week. Your company is a true growth story-- 141% revenue growth year over year on average over the last four quarters. This is still a company that has yet to turn a profit. Were even you surprised to see the stock more than double than its market debut?
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FRANK SLOOTMAN: Yes. I mean, we certainly were-- you know, were expecting to have a, you know, a hearty reception by investors based on all the interactions we'd had before then. But obviously, that exceeded anybody's expectations, including ours, yeah.
BRIAN SOZZI: Frank, what was the pitch to the folks at Berkshire Hathaway? They don't-- normally don't invest in tech stocks outside of Apple. How'd you convince them?
FRANK SLOOTMAN: Well, I mean, it's more that they convinced us. As many people have observed, this is not something that you normally see from Berkshire. But we started interacting with the insurance side of Berkshire a while ago and just through that as a customer, effectively.
And, you know, through that process, them becoming familiar with us, became interested in being an investor, if there were such an opportunity. And that sort of led us to, you know, what you saw play out this week. I think Berkshire, they should speak for themselves, obviously. But, you know, they're also evolving and becoming a much more tech-aware, tech-centric tech-focused conglomerate.
ALEXIS CHRISTOFOROUS: Have you talked at all with Warren Buffett since going public, Frank?
FRANK SLOOTMAN: I personally have not. You know, our interactions, you know, have been with Todd Combs, the CEO of Geico. And Todd obviously also acts as chief investment officer. So maybe that's the younger generation of Berkshire. I'm not sure how to characterize that. So--
ALEXIS CHRISTOFOROUS: You know, Frank, I know over the past couple of days, you've been answering this question a lot about whether or not Snowflake left some money on the table, whether the stock was priced correctly, given the significant pop we saw the first day of trading. Did you consider a direct listing for Snowflake? And why was a traditional IPO the right path for you?
FRANK SLOOTMAN: Yeah. We did consider a direct listing, and I really have nothing against the direct listing. I'm not-- and I really don't want to be caught up in these zealous debates, you know, over IPOs. I think the IPO is a very tried and true, extremely well-vetted model for taking companies public. But there's two aspects that are important in an IPO.
One is when you're raising money in a [? DL, ?] you're not raising any money. And we were going to raise money. And the second reason is that we wanted to assemble a very specific institutional ownership of the company. This was not going to be a free for all where, you know, anybody could just, you know, buy shares that we're just going to offer to the highest bidder.
And we've literally, you know, spent the last year, you know, very gradually bringing along that institutional ownership, gradually increasing their holdings for them to be big buyers in the IPO and as well as in the aftermarket. You know, sometimes people on the investment side, they think it's strictly a matter of scraping the last dollar off the table versus we have other interests.
You know, we need to live with our investors for a very long period of time, so we try to sign up people that can hold multi-billion dollar positions, people that don't chase momentum up or down, and people that want to sign on for the mission for five or 10 years. And that's a very different crowd than with people that you saw on Wednesday that were chasing this thing up. They were buying it at any price. And there was zero discipline, as that's been pointed out by other observers, you know?
BRIAN SOZZI: Frank, you have the reputation as a true rock star CEO in the data space. Data Domain-- sold it to EMC. ServiceNow-- took it public. Big win here with Snowflake. Clearly, you know the data space. When does the Snowflake business model turn a profit?
FRANK SLOOTMAN: It'll turn a profit when the growth starts moderating. I think what a lot of people, you know, don't appreciate is that don't look at the actual profitability. Look at the inherent profitability of the business model, right? High growth companies like ours have to invest at a tremendous rate because it's a very dynamic set-up. Because we have to invest, you know, in this year for next year and the year to come.
So when you look at profitability during a period, it doesn't really reflect the true profitability for that period because the company is investing in future periods. And our investors obviously understand growth investing. They've certainly been around thus far in a couple of companies, and they know how it works.
So this whole concept of inherent profitability-- understanding the unit economics, understanding operational efficiency at scale-- that's really what they look at rather than just P&L. That really doesn't reveal that much of anything. It distorts the true economics of the companies, and it doesn't help people understand what's going on.
BRIAN SOZZI: Frank, you're a true American success story. If I have it right, you came here from the Netherlands in 1984. And now you're reportedly worth $1.8 billion. I know it's something you watch, but a real success story here. Capitalism is really under fire in this country. What are your thoughts on that?
FRANK SLOOTMAN: You know what? I'm the biggest bull on this country in every way. It pains me to-- you know, to see Americans, native-born ones to be down on this country. Most of my fellow immigrants think they have hit the lottery being here. I've lived it. You know, I didn't speak English very well, wasn't even my second language when I came here.
I had $100 in my pocket. Yeah, you don't get there by sitting back and waiting for things to happen to you. You've got to get after it. That's what this country is all about. But it's no surprise that so many people want to come here, you know? That pretty much says it all.
ALEXIS CHRISTOFOROUS: Yeah, Frank. As Brian noted, this is the third company you've taken public very successfully, might we add. Why do you seem to have this Midas touch when it comes to taking companies public?
FRANK SLOOTMAN: You know, I don't think I have a Midas touch, you know, and I'm not fixated on IPOs either. My-- IPOs are milestones. You know, we view ourselves as builders of businesses. And the IPO serves that purpose, you know, through capital, as well as, you know, raising the profile of the company in the marketplace, you know, because we're big enterprise players.
You know, we sell to the largest companies in the world. We compete against the largest companies in the world. It's very important to raise the stature, you know, of a company with a name like Snowflake, right? So you can just see how an IPO helps tremendously, you know, sort of change the awareness and the regard for the company. That's really why we're doing this. You know, we're not after sort of notoriety in its own right.
So IPOs are part of our business mission, our business journey. They are not exit ramps. They are-- they're just-- you know, I've sometimes said, it's going from playing on Saturday to playing on Sunday, right? So, you know, from being in college to being in the NFL. And, you know, that's a transition you go through as a company. We're all growing up, you know? We used to be babies. Now we're soldiers, you know?