Couchbase Scopes Out IPO

Analysis2

By: Mary Jander

Distributed cloud-native database vendor Couchbase has filed an S-1 registration statement with the U.S. Securities and Exchange Commission (SEC) as a first step toward going public. And the move raises questions about the company's IPO prospects.

Couchbase, a featured vendor in the Futuriom 40 report, originally filed its S-1 in February 2021 but has been updating the document regularly since then. The latest iteration, filed June 21, 2021, is not complete, but it lays out the basic elements of the company’s plan to raise $100 million on Nasdaq under the ticker symbol BASE at an as-yet-unspecified future date. The proceeds will go to grow the business and repay some debts.

Couchbase Basics

Couchbase, headquartered in Santa Clara, Calif., was formed in 2011 by the merger of an earlier company called Membase with another called CouchOne, which resulted in the creation of what Couchbase terms “a next-generation, cloud-native, open source database company.”

2020 futuriom primo pro 300x600

Couchbase claims to have been first with a Kubernetes-based NoSQL database, which the vendor says runs tens of millions of operations per second with millisecond response times. The database functions at all points in a modern distributed environment, from on-premises to multi-cloud and everything in between, including Internet of Things (IoT) and mobile. Couchbase also offers a fully managed “database-as-a-service” solution called Couchbase Cloud.

“Our architecture automatically creates copies of data across multiple nodes without a primary node that is vulnerable to data loss or interrruptions,“ states the S-1.

Couchbase Competitors Are Legion

While Couchbase claims outstanding features, so do a rising group of competitors offering NoSQL alternatives for cloud environments, including market behemoths such as IBM (NYSE: IBM), Microsoft (Nasdaq: MSFT), Oracle (NYSE: ORCL), Software AG, and VMware (NYSE: VMW), along with richly funded startups such as in-memory database supplier Redis Labs, which scored $110 million in Series G funding in April 2021; and younger Macrometa, which makes a serverless, stateful NoSQL database and raised $20 million in Series A funding in June 2021.

There also is competition among vendors who have adapted SQL relational databases to distributed cloud environments. These include Yugabyte, whose distributed SQL database-as-a-service has gained popularity — and a $30 million Series B round last summer. And cloud-native SQL vendor Cockroach Labs, another Futuriom 40 company, scored $160 million Series E funding early this year and is said to be mulling its own IPO.

All this competition concerns some experts. But Couchbase maintains that its 549 customers in over 50 countries (including some pictured below) attest to its outstanding features. It claims 23 customers with over $1 million annual recurring revenue (ARR). Each of those customers increased spending an average of 21x since starting with Couchbase. “Our dollar-based net retention rate was over 115% for each of the past five quarters,” states the S-1.

Logos of some Couchbase customers. Source: Couchbase

Couchbase Financials

Couchbase claims to have recorded revenues of $82.5 million for the year ended January 31, 2020, and $103.3 million for the year ended January 31, 2021 — a 25% jump. But for the same period, net losses were $29.3 million and $40 million, respectively.

Couchbase says it’s investing in the growth of its business because there’s a massive opportunity—$42.9 billion in 2020, expected to grow to approximately $62.2 billion in 2024.

Much of that opportunity is among current enterprise architects and application developers looking to migrate from legacy databases. In a survey of 450 IT decision-makers published in the spring of this year, Couchbase reported that 60% have been reducing their use of relational databases over the last year, and 64% plan to reduce their reliance over the next 12 months.

Prospects Mixed

While an IPO seems reasonable, there are questions about whether it’s the right time for Couchbase. The competitive landscape and the sizable losses could hinder the vendor’s potential in the public realm, where shareholders demand profits and not every IPO succeeds. Still, there’s not much downside in Couchbase’s revenue and customer metrics. And IPO success could be a signal to other tech firms to follow the traditional path to public riches.