Thinking big – and spending even bigger – has landed Josh James in a tough spot. That will become clear later this week, when the company that James heads, Domo, prices its IPO. But it’s even more clear when we compare the planned offering by the current company led by James with the mid-2006 offering by the previous company led by James, Omniture. Simply put, it’s the difference between a company going public because it wants to (Omniture) rather than because it needs to (Domo).
The IPO papers show that although the two companies have the same CEO, somewhere over the past dozen years, James lost fiscal rigor. The relatively parsimonious operations last decade at Omniture gave way to a lavish lifestyle at Domo, which has resulted in James having to tap Wall Street to keep the lights on. Consider this: in the final quarter before the offering, Domo is roughly twice the size of Omniture, but is losing 10 times more money, on both an operating and net basis.
Looking closer at the two prospectuses, it quickly becomes clear how Domo’s financials became so deeply stained in red compared with Omniture. Even in its early days, Omniture never really spent more than half of its revenue on sales and marketing. For the two years after its IPO, Omniture spent 44% of revenue on sales and marketing, a level that’s consistent with other hyper-growth SaaS vendors.
Domo, on the other hand, has spent more on sales and marketing than it has taken in for revenue on every single financial period it has reported. And, more to the point, the huge investment isn’t really paying off for Domo, certainly not the way it did for Omniture. Domo, which is reporting decelerating growth, posted just a 32% increase in revenue in its most recent quarter, while Omniture basically doubled revenue every year on its way to creating a $300m-revenue company just two years after its IPO.
Put it altogether, and Domo has piled up a mountainous $800m in accumulated deficit. In comparison, Omniture burned through just $35m on its way to Wall Street. In the current era of mega-fundings and ‘growth at all costs’ business plans, Omniture’s paltry deficit seems almost quaint. So, too, does the fact that just four banks took the company public, half the number listed for Domo and most other software IPOs these days.
For more real-time information on tech M&A, follow us on Twitter @451TechMnA.