Last week, data management and dashboard start up Domo announced it had raised an additional $200 million in growth capital, bringing its total haul over the past four years to a truly remarkable $450 million.
Now given that the company has yet to even come close to breaking even, this can be viewed as either a great validation of Domo's business model, or as more evidence of the “Bubble Mania” of the current technology financing landscape and a screaming signal to get out while you still can.
For those in the bubble camp, Domo is a “Tech Unicorn,” a recent start-up worth, either through a financing, an acquisition or IPO, more than $1 billion usually without any meaningful profits to speak of and thus instead valued via reasonings and justifications far outside of the pale of traditional finance and accounting.
On the other hand, while financings for companies at Domo's stage of development have never been as large and audacious as they are now, do remember that valuing technology companies on a combination of their future earnings promise, the intonations of their charismatic founders, and just the out and out coolness of their technology is nothing new, and that much more money has been earned than lost on these kinds of bets.
From this perspective, Domo is just another in a long line of American software companies - like Uber, Palantir, Airbnb, Dropbox, and Slack - with the ability and promie to transform and disrupt “Business as Usual” for core life and work processes across markets and industries.
And investors just can't enough of them.
On a macro level, this has a lot to do with simple supply and demand. Globally, most investors only feel comfortable putting money to work in places with stable political systems, stable currencies, liquid exit markets, and ones that have protections against expropriations of wealth once earned. So both crossed off are domains where 80%+ of the world’s population’s live and work, and characteristics that the U.S. in general and California in particular have in unique abundance.
On a micro level, most investors prefer to deploy capital without taking Technology Risk (as would be typical in say - a biotech start up).
So easy to understand and believe in are Software-as-Services Models like Domo's, with business models often boiling down to a simple cost of customer acquisition cost divided by lifetime customer value metric (in Domo's case, over $50,000 per customer!).
And most importantly, investors have and will always love to back Disruptive Technologies - which, to be clear, is different from Technology Risk.
This has been true from the days of Rockefeller with Oil, to Ellison, Gates, and Jobs with the computer and software, through Zuckerberg with social media to Kalanick and Chesky with Uber and Airbnb and The Sharing Economy.
And so it is potentially true with Domo and its promise: The better organization, visualization, and analysis of data, toward the end of changing the world of business done by gut and hand to one done by statistics and evidence.
And because this value when delivered to customers is so potentially significant - making their enterprises more efficient and predictably profitable - Domo's ability to both charge a lot for its services and have customers stay with them for a very long time is again...
...easy to understand and believe in.
And that's why that $2 billion valuation may not be so high after all.