16 ms·

Why is Snowflake so Valuable?

247 points by malisper 6y ago

jredwards 6y ago
Because we're in a tech bubble. These valuations are absurd.
- drawkbox 6y ago
  That and low interest rates and looking for a place to put money, plus the Warren Buffet multiplier. There are only 3600~ companies on the US markets [1], half of what was there in the 90s. There aren't many places to put lots of money. The rise of private equity (PE) really has taken lots of the growth out of the public markets but since there are so few, and low interest rates, people are looking for returns. Lots of it is also pump and dump schemes loading up stocks and then short and distort. The problem is the growth is tapped on public markets now, PE drains it before it gets there, so more volatility games are being played. Couple that with less spending purchasing power in the lower/middle and that adds to the games as investment in new consumer focused companies isn't working as well when purchasing power is drained, M2V has hit a precipice [2] [1] https://www.wsj.com/articles/where-have-all-the-public-companies-gone-1510869125 https://www.wsj.com/articles/where-have-all-the-public-compa... [2] https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V
- vaccinator 6y ago
  With all the money the government is giving around, it might be part inflation too.
kwillets 6y ago
Nerds are surprisingly susceptible to hard-sell tactics.
sharadov 6y ago
Ok, It's a great product, but valuation still does not make sense!
- deleted 6y ago
  [deleted]
- newguy1234 6y ago
  My experience with investing tells me that you will never get a good investment at a fair value, you always have to pay a premium for it. There is a pretty consistent pattern in my stock portfolio. The stocks that I overpaid for ended up being great investments while the stocks that I thought I was getting a deal on ended up being a disaster of an investment.
aerodog 6y ago
buffet effect. it's insane
gumby 6y ago
Because interest rates are super low and there’s a lot of uninvested capital sloshing around.
deleted 6y ago
[deleted]
TuringNYC 6y ago
Almost all the big companies I worked for had a "database gang" -- a database group which, in the name of centralization, forced you to bow to them to get anything. New DB? bow to them. More nodes? bow to them. Reboot? bow to them. The internal budget "prices" would be off the charts unbelievable. It makes sense to centralize, but only at a certain cost. Beyond that cost, it is better to just de-centralize because not every project can spend 4-5 months of meetings to spin up a DB. The cloud changed this because it became an OpEx discussion and something you could spin up on your own. For non-production workloads, it comes especially obvious to do this.
- stingraycharles 6y ago
  This still in no way answers why Snowflake is so valuable, though. I completely understand our argument, and I agree with it; I just don’t think the article’s arguments are anything else than ex post facto rationalization. When they mentioned NPS I almost snorted my coffee, that metric can be gamified in any way you want it.
  - stcredzero 6y ago
    >> Almost all the big companies I worked for had a "database gang" -- a database group which, in the name of centralization, forced you to bow to them to get anything. New DB? bow to them. More nodes? bow to them. Reboot? bow to them. The internal budget "prices" would be off the charts unbelievable. > This still in no way answers why Snowflake is so valuable, though. It explains it to a T! You have something you want, but internal company politics and territoriality keep you from getting it the way you want. An outside provider lets everyone get it for a bit of cash. It's basically the same play as Salesforce. It's not some kind of technical moonshot. It has to do with a modicum of technology delivered by a 3rd party who can avoid all of the internal friction. The next founder who can think of this kind of play, then execute on it, will be the next Salesforce/Snowflake, and will probably have the ear of the same investors!
    - stingraycharles 6y ago
      What I meant was why Snowflake specifically is so valuable. BigQuery, Redshift or any other cloud db would fill this gap as well. Why Snowflake?
victor106 6y ago
> Net promoter score (NPS) is a way of measuring customer satisfaction. How easy/hard is it to fake an NPS score? Is this somehow regulated? Can the company only provide its most satisfied customers (which it knows beforehand) and only have them participate to get a good NPS?
- stingraycharles 6y ago
  NPS can be gamified in any way you want it. If you want to use it as a real metric to improve your product, it’s a great metric. But if you want to use it to convince shareholders your company is very valuable, it’s extremely easy to do so by implementing certain biases.
- jmt_ 6y ago
  I also have some questions/concerns over the NPS. Online surveys, which is effectively the instrument of NPS, typically yield statistically incorrect data due to, often, some flavor of self-selection bias. If you think of an online survey as an experiment, they rarely allow enough control over the sample to mean much. However, that's not to say it's impossible to properly conduct an NPS, just that it's probably very easy to get wrong which may paint a false picture.
- runako 6y ago
  Likely this can be easily gamed. But in the context of Snowflake's value, NPS manifests in Net Retention, which is likely to be more difficult to fudge: > For every $1 of revenue Snowflake received from their customers a year ago, that same pool of customers are now paying $1.58. Net Retention is more important, but in this case it also gives credence to the NPS number.
- adarioble 6y ago
  NPS originally came from car manufactures and industries that produce products that are easy comparable, I.e. how happy are you with the car? Would you recommend BMW to friends? I don’t think it’s that great for software, but it’s very trendy. It can be gamed, like anything else, usually by sending NPS surveys to decision makers who aren’t usually the actual users. Slightly better metric is Customer Effort Score (CEF) which shows how easy is to do business with a company.
physcab 6y ago
I've used Snowflake a fair amount. It's a decent product, probably on par with Redshift / BigQuery. Obviously theres a lot of hype and free money floating around but my take on why they are popular is that they are basically a replacement for large Hadoop installations that have become untenable to manage over the past decade. If a company is already using Redshift or BigQuery I'm not sure why they would switch. I would be apprehensive in investing in Snowflake long term purely because their product is highly susceptible to being obsoleted in the next 5-10 years.
- cgenschwap 6y ago
  I was at a company that switched from Redshift to Snowflake. It was a night and day difference. Faster (orders of magnitude!), cheaper, and significantly easier to work with (since everyone had their own personal view of the data to mutate/work with). As far as I can tell, it is a unique product in the database space. Extremely well executed ideas and design.
  - deleted 6y ago
    [deleted]
  - jeffffff 6y ago
    yeah redshift is not at all comparable to snowflake. big query is much closer, it's ahead in some areas and in the last year has closed some of the gaps where it wasn't. big query's biggest problem is that it's tied to gcp which is a distant 3rd in cloud marketshare. they have big query omni coming which is multi-cloud but it'll probably be a while before it's comparable to big query in gcp.
    - philjohn 6y ago
      The other problem with BigQuery is that you can very easily write a query that's going to cost you a lot of money to run - with Snowflake you can let it run for an hour or so, and then realise it was a bad idea and you're only out a few credits, a handful of dollars. The killer feature for me was the query profiler - you can see WHY a query is taking a long time and optimise it - BigQuery just felt like Google were brute forcing the performance, and then charging you accordingly. When the project I was on switched, the micro-clusters (and the ability to recluster a table) as well as the MERGE semantics beat BigQuery hands down - although those features my be out of beta now (but I've moved on to a new gig).
Hizonner 6y ago
I take it I'm supposed to know or care what "Snowflake" is...
- AnimalMuppet 6y ago
  If you don't know and don't care, you could always not comment...
  - Hizonner 6y ago
    The point of the comment is that it would take like 3 words to identify what the thing is, so that you could save everybody who doesn't know what it is from having to do a bunch of research to figure out whether it's interesting to them. It's sloppy writing with no respect for the audience's time.
- haswell 6y ago
  There are many things that show up on HN that have names I don't recognize. When this happens, I'm excited! I get to learn about something I didn't know about before. A simple Google search for "Snowflake" will immediately answer your question - both by the company being the top result, and by Google conveniently including a card with an overview of the company. There's also plenty of stuff that shows up on HN that I don't care about because it's not relevant to me, but that doesn't mean it isn't relevant to the rest of the community.
zwieback 6y ago
I guess this quote from the article sums it up: "There was so much hype, my mom, who doesn't even know what Snowflake is, decided to invest in Snowflake."
- joshdick 6y ago
  "Taxi drivers told you what to buy. The shoeshine boy could give you a summary of the day's financial news as he worked with rag and polish. An old beggar who regularly patrolled the street in front of my office now gave me tips and, I suppose, spent the money I and others gave him in the market. My cook had a brokerage account and followed the ticker closely. Her paper profits were quickly blown away in the gale of 1929."
autokad 6y ago
I think part of it is that many know that most companies under perform the market. So I imagine it's not hard to see someone justifying (correctly or incorrectly) that its worth paying more for a company you think is more likely going to be one of those outliers. and being that there is a limited supply of these companies, they can shoot up in value fast. I never used snowflake, so hard for me to have a solid opinion of this company. I remember when facebook IPO'ed and people were like 'what? worth 100 billion? OVERVALUED'. and they were wrong in every way. so who knows? Though my gut doesn't tell me this company is the next facebook. coming out of the gate with a 70 bil market cap feels like all the growth is already priced in. With facebook and on their IPO, I felt just their mobil revenue in 5 years time alone would be worth their valuation. But I had week hands. I think I bought them at 28 and sold at 22. I should have had more conviction because I truly did believe they were worth a lot more.
blackbear_ 6y ago
Am I wrong if I say that they are so valuable (in monetary terms) just because they are the only (or one of the few) non-free database management systems (or whatever they are)?
- johncolanduoni 6y ago
  Not really, they’re largely targeting the same kind of use cases as redshift and bigquery.
  - mr_toad 6y ago
    I ask people if they’ve ever heard of Redshift and BigQuery, and most, even many in IT haven’t. But everyone has heard of Snowflake.
    - johncolanduoni 6y ago
      Sure, I’m not arguing that they’re equally good or equally good at marketing. But they’re far from the only cloud OLAP database.
soumyadeb 6y ago
People are excited about Snowflake because it can completely disrupt the traditional data-warehouse market. The legacy players like Teradata and Exadata (from Oracle) really don't scale. Teradata has ~2B in revenue, Exadata is probably in the same range. That's all up for grabs but that's only scratching the surface. Historically, only transactional data was dumped into the warehouse. Snowflake is selling storage at S3 price (plus you get compression so often ends up cheaper) while they are making money of compute/query. If they can provide all the right query abstractions (SQL, full-text search), in theory all data can be thrown in Snowflake. Yes, tech savy bay area companies can setup their own stack using Presto etc but rest of the world is not like that.
- ETHisso2017 6y ago
  >>>Yes, tech savy bay area companies can setup their own stack using [insert open source tool here] etc but rest of the world is not like that. It sounds like a ton of these cloud infra companies have this product strategy (datadog, snowflake, elastic, hashicorp, etc)
  - Spartan-S63 6y ago
    When you look at cloud infra companies like that, their competitive advantage is in quickly being able to ingest data and make it accessible, so an off-the-shelf solution likely doesn't exist for their particular use-case. Also, since that operation is your competitive advantage, you should look to in-source it rather than reach for a COTS solution.
- hilbertseries 6y ago
  > Yes, tech savy bay area companies can setup their own stack using Presto etc but rest of the world is not like that. My last company was an early adopter of Snowflake. And we tried Presto first, circa 2016 and Presto was sloooow. We were using vertica at the time and it was so much slower. Snowflake on the other hand was able to perform on the same order of latency as Vertica, which was pretty crazy to us.
  - 6y ago
jcfrei 6y ago
I don't see it mentioned in the article but isn't one of the main selling points of Snowflake their data exchange? Companies upload their data to Snowflake in the hopes of someday monetizing it? If that's the case then I think it's just a matter of time until regulators become interested too.
cblconfederate 6y ago
If you were a foreigner and had to invest your savings somewhere (because banks and govs are forcing negative rates) where would you invest
- newguy1234 6y ago
  I would invest all of it into Snowflake stock, of course. The shoe shine boy told me about it....
- wtf_is_up 6y ago
  AMT / DPZ 50/50 split
  - manigandham 6y ago
    5g and pizza? Interesting combo.
bob33212 6y ago
People want to own the next Salesforce. Snowflake could expand into ERP/CRM/Visualizations. There is over 50B revenue across the world in those areas.
- jariel 6y ago
  Those lines of business are very far away from Snowflake.
  - jacques_chester 6y ago
    They were from Oracle too.
jariel 6y ago
The article talks about 'good things' but doesn't put them in context of valuation. $60B is still too much. It's odd that Buffet is in, it's a weird signal, because this is a weird era for markets: all other things equal, we are looking at .com-ish situations here and the timing would be ideal for a true crash. That the world economy is shrinking by 10% and governments, major industries are going insolvent should be scary. Perhaps investors think they are preparing for the 'covid future' but this may be a weird kind of inflation whereby everything else (including cash) is crap so they are piling into winners. There is an emotion to a lot of stocks these days that is probably making every analysts job a nightmare - if the CEO or company is popular, it really messes with valuation.
- panda88888 6y ago
  One thing to keep in mind is the price at which Buffet invested. I vaguely remember they he invested at about $70 per share (I may be wrong. Just going by memory here). This means there are a lot of buffer room for correction at current price of around $250.
- phonon 6y ago
  > It's odd that Buffet is in More like Todd Combs and Ted Weschler...
- sjg007 6y ago
  I am guessing all of the Berkshire companies are either integrating into snowflake or have.
kthejoker2 6y ago
As someone who spends a lot of time in this space, their only "killer app" is automated workload / data distribution management. Which is cool, and hard to get right, but clearly something the cloud vendors and other data players are have taken steps towards / offer more or less the same outcomes. And in contrast their Silicon Valley roots means a lot of their tooling/UX/data capabilities are ... undercooked. Their Web IDE feels like a throwback to 2003 Hadoop, their ETL capabilities are a joke, they don't support joins in views ... And they've also squandered some opportunities to actually offer a differentiating "all in one" data processing experience for ad hoc/exploratory, BI/aggregated, and Big Data/AI/ML model crunching. For example, here's their garbage blog post on Spark SQL - https://www.snowflake.com/blog/snowflake-spark-part-2-pushing-query-processing/ https://www.snowflake.com/blog/snowflake-spark-part-2-pushin... tl;dr when someone writes a Spark job that includes a filter against data in Snowflake, it's more efficient to let Snowflake filter the data before shipping it off to the (much more performant) Spark engine to do the actual analytical pieces of the query plan, instead of just shipping all the data over and letting Spark do the filtering. Like ... wow, predicate pushdown is your answer? Contrast with Azure Synapse providing Spark and SQL Server compute in the same environment; Databricks adding Delta Lake capabilities to be more schema-on-write friendly; Dremio building AI into their caching, and Starburst into their workload management ... Anyway, I don't see any secret sauce, which means it's still just traditional enterprise sales cycles...
- chrisjc 6y ago
  > they don't support joins in views Perhaps you mean they don't support joins in Materialized Views (uppercase M)? We use Snowflake views with joins all over the place. Furthermore if views don't cut it for you, you can always use joins in UDTFs. Or if you really need joins in a materialize view (lowercase M), you can use change streams in combination with joins to maintain your own materialized view (table). > instead of just shipping all the data over and letting Spark do the filtering Forgive my ignorance, but in what capacity would this be less efficient? Doesn't it make more sense to reduce you result set before shipping it off to external compute?
  - kthejoker2 6y ago
yalogin 6y ago
I don't know anything about Snowflake but in general they are fortunate to go public in this time. The tech market is in a bubble and investors are frothy at the mouth for tech stocks. Pessimism started to creep in for some of the already sky high tech stocks. Snowflake IPO'd right at that time and people just flocked to it.
jng 6y ago
Can someone summarize Snowflake's unique technical value? I'm quite familiar with both Redshift (I would summarize it as Postgres adapted to sharded, columnar OLAP functioning) and BigQuery (there is a famous paper explaining the architecture). Also with more traditional databases such as MySQL, PostgreSQL, SQL Server, and columnar OLAP databases like Vertica. I explored the website a little bit, but couldn't construe a clear statement of the technical architectural value. Some of the comments here are valuable, but I'm missing a clearer "big picture" overview. Thanks!
- soared 6y ago
  Snowflake’s value is that they provide the same technical products as amazon/google/etc, but are not amazon/google/etc. Some shops like buying into the google ecosystem, some are afraid of vendor lock in. Probably other things, but many companies exist just to be alternatives to faang. If you’re good enough, you surpass that intention.
  - jng 6y ago
    I saw them a year or two ago positioning themselves in contrast to Redshift and BigQuery. I though "these guys are building something for Microsoft to acquire" (my thought was, something with a more modern OLAP architecture than SQL Server, which they can offer via Azure). Naive me, they were so much more business savvy than that...
    - sjg007 6y ago
      The snowflake team came from Microsoft.
    - kwillets 6y ago
      SQL Server had too much political pull within the org for such a deal to succeed.
- malisper 6y ago
  (I'm the author of the post.) I've worked with a large Postgres cluster before (~1PB of data) and have been experimenting with Snowflake recently. I would say there's two clear technical advantages of Snowflake over Redshift. First is there's no maintenance when using Snowflake. You just signup for a Snowflake account, upload a CSV, and you can start querying the data. This is in contrast to Redshift where you have to manually provision a cluster, resize it as you add more data, etc. The second is their pricing. Storing data in Snowflake costs the same as it would cost to store in S3. The tradeoff is you also have to pay based on how long your queries take. Depending on your workload this can result in a massive cost savings. If you access only small amounts of your data infrequently, it's like you're storing the data in S3 and you only have to pay a bit more when accessing the data. This is in contrast to Redshift where you have to pay for the full cost of the cluster regardless of whether you are actually querying the data or not. Snowflake also has a ton of quality of life improvements compared to Redshift. One really nice thing is you can change the amount of compute used for any individual query. For example, if you have one specific slow query, you can allocate 4x the compute for that one query, pay 4x as much while the query is running, and get the query to run 4x faster (ultimately costing you the same amount as if you used 1x the compute). One neat thing is there's ultimately only one "Snowflake instance" in each region. Everyone's tables are in the same instance, but you can only access the tables you have permission to access. This allows you to easily share data between different Snowflake accounts. You can store the data in one account and query it from another. So the core value proposition is really strong and it also has a bunch of extra features that are all pretty useful at the end of the day. This post focused on Snowflake solely from a business point of view. I'm considering writing another one that focuses on it from a technical point of view.
cm2012 6y ago
I did an analysis of Snowflake's Facebook ads if you want to see how they message there and the kind of content they promote : https://www.rightpercent.com/b2b-guides/snowflake-just-went-public-quick-analysis-of-their-facebook-ads https://www.rightpercent.com/b2b-guides/snowflake-just-went-...
suff 6y ago
Snowflake does INLINE hardware provisioning INSIDE the query syntax. Fully managed and mostly automatic. Fire half of your DevOps team. That's why it is so valuable to Wallstreet. Companies that don't use it are wasting lots of money so there will be mass migration. It's more than query optimization, it's also dynamic horizontal query scaling. It's the same reason cloud providers are so much more valuable than rack hosting companies. It's a generational leap ahead in automation.
iblaine 6y ago
Snowflake seems to be part of a segment of companies that are defying economy reality during covid: $TSLA, $ZM, $SNOW. These companies have huge P/S ratios and a higher volume of options activity relative to their underlying stock. A rational person may look at metrics, but we're not in a rational market. The strange behavior of the market may explain these valuations more than anything else. And maybe 3 digit P/S ratios are the new normal. [1] https://www.ft.com/content/b330e091-2a59-4527-b958-9213731a526c https://www.ft.com/content/b330e091-2a59-4527-b958-9213731a5...
pmarreck 6y ago
1) What is Snowflake? 2) What is their stack?
ineedasername 6y ago
For every $1 of revenue Snowflake received from their customers a year ago, that same pool of customers are now paying $1.58. That means Snowflake could acquire no new customers, and they would still be doubling revenue every 18 months. No. That would require customers to grow their spend 58% every year. Might happen early on, especially as projects like this are usually staged in phases so the initial go-live usage is lower than when you get to full production. But projecting long term revenue growth on the basis of average annual 58% increases in per-customer revenue is simply ridiculous.
- __Joker 6y ago
  Agree. Generally it kind of stabiles around lower than that. For example for cloudflare[1] it is around 110%, while this[2] points to 109 being kind of standard. 1. https://www.sec.gov/Archives/edgar/data/1477333/000119312519222176/d735023ds1.htm https://www.sec.gov/Archives/edgar/data/1477333/000119312519... ( see dollar based retention rate) 2. https://medium.com/@sammyabdullah/109-net-dollar-retention-is-the-new-standard-8c21685e5f99 https://medium.com/@sammyabdullah/109-net-dollar-retention-i...
mathraki 6y ago
The thing to keep in mind is that leadership in data management lasts about 5 years, definitely less than 10. An (incomplete but representative) timeline: - late 90s: Early DWs like Redbrick - early 2000s: Oracle, Teradata - late 2000s: Shared-nothing Data Warehouses (Vertica, Aster Data, Greenplum) - bought up by Teradata, EMC, HP - early 2010s: Hadoop and Hive - late 2010s: Redshift and cloud DBs - early 2020s: Snowflake - late 2020s: probably something else... All these technologies felt they were here to stay at the time, but they didn't. Will Snowflake be the exception? Maybe, but the odds are not nearly as great as their valuation implies.
georgewfraser 6y ago
In order to grow into this valuation, snowflake will need to become the biggest data warehouse company ever. They have a great product and that will probably happen! But you need to be highly confident of the best case scenario happening to buy at the current price.
- dash2 6y ago
  Yeah, the article seems to be contradictory. First it says “even my Mum, who knows nothing about Snowflake, bought shares.” Then it gives complex technical analysis to explain why the share price is high. Um, I think the first explanation works better.... In general the article persuaded me that Snowflake is a great company. But without some maths relating all these numbers to an estimate of future revenue, there’s no way to tell if it’s a great stock — at the current price. It’s the same problem that Tesla bulls have.
P00RL3N0 6y ago
If I want full ownership of my data, meaning I don't want it managed/hosted by Snowflake, doesn't that mean that snowflake will reference my S3 bucket as an external table? How exactly am I going to be saving money? Snowflake will have to index my S3 bucket, most likely doing a poor job at doing so, all the while charging me for S3 requests just to create an index that I'm already maintaining. My company has strict contractual obligations regarding data de-identification that I have written code to securely index. We use S3 to store de-identified data and the index to query data we have in S3, meaning that we run no risk of our customer data being identified even if attackers acquired access to both the index & S3 bucket. Snowflake may not be trying to handle our use-case, but the corporate account executive spamming my inbox was dead certain that it was our panacea. I'm failing to see where they fit in and I'm glad that my manager listens to me. I also don't see the arguments that Snowflake is beneficial because it is cloud-agnostic. I can count the number of cloud-agnostic employers I've had over my career on 0 hands. If I can't set up Lambda triggers to puts to my S3 bucket, then snowflake is a hard no from me.
snird 6y ago
This article explains why Snowflake is a great company. And there's no doubt about that. But it does not explain why it is valued at 60B$. Or if that value makes sense. To put a price on a company, I need to know in projection for the next 5-10 years what income they will generate to shareholders. The fact that they are a great company does not guarantee they will generate an income to shareholders that value them at 60B$. This is how bubble starts. Overvalue a great company, then overvalue fair companies just not to miss out and "in comparison" with the great companies, and in the end, overvalue nothing (if Tesla is great, then Nikola was the nothing).
- Cthulhu_ 6y ago
  That assumes the stock market is logical and rational, but you know it isn't. Stock prices are mostly independent from the underlying company's actions and performance, and instead vary depending on investors. The bigger investors have so much money and influence (e.g. operating multiple large 'financial news' / stock news websites) they can sway the prices wherever they want.
  - inbx0 6y ago
    So maybe the article should've been Why is Snowflake so Valuable? Stock market is not logical or rational. Thanks for reading.
tekkk 6y ago
This is some ridiculous overvaluation. I've used their product and while it worked all right, I could definitely notice part of their websites and docs being half-assed by not very experienced web developers. Which didn't really conjure an impression of quality to me. More like, "let's do things in hurry to get the money". I don't know how can you, as an investor, rationalize the price by any other reason than speculative increase in share price. Which is again driven by some fundamentals but mostly by hype. If they fail to gain almost 100% increase in revenue for the next year, that 60B is looking way too high. Compare this with something like Splunk. They make high quality product and have over 2B in revenue (with a nice growth curve). Market cap 30B. So is Snowflake as of now worth two Splunks? I don't think so. I could see it maybe being half of that, 15B, if I squint real hard.
kerng 6y ago
How does Snowflake compare to Databricks?
bydlocoder 6y ago
So, at the moment Snowflake beat all the cloud providers at usability, but what stops them from improving their offerings using the tech Snowflake can't match because it doesn't own the hardware? Like, as far as I understand AWS Aurora could only be offered by Amazon because it uses interfaces available only internally. Also, it seems that DWH/analytics landscape changes very rapidly, isn't being "long Snowflake" is actually "short progress"?

247 points by malisper 6y ago

jredwards 6y ago

Because we're in a tech bubble. These valuations are absurd.

drawkbox 6y ago
That and low interest rates and looking for a place to put money, plus the Warren Buffet multiplier. There are only 3600~ companies on the US markets [1], half of what was there in the 90s. There aren't many places to put lots of money. The rise of private equity (PE) really has taken lots of the growth out of the public markets but since there are so few, and low interest rates, people are looking for returns. Lots of it is also pump and dump schemes loading up stocks and then short and distort. The problem is the growth is tapped on public markets now, PE drains it before it gets there, so more volatility games are being played. Couple that with less spending purchasing power in the lower/middle and that adds to the games as investment in new consumer focused companies isn't working as well when purchasing power is drained, M2V has hit a precipice [2] [1] https://www.wsj.com/articles/where-have-all-the-public-companies-gone-1510869125 https://www.wsj.com/articles/where-have-all-the-public-compa... [2] https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V
vaccinator 6y ago
With all the money the government is giving around, it might be part inflation too.

kwillets 6y ago

Nerds are surprisingly susceptible to hard-sell tactics.

sharadov 6y ago

Ok, It's a great product, but valuation still does not make sense!

deleted 6y ago
[deleted]
newguy1234 6y ago
My experience with investing tells me that you will never get a good investment at a fair value, you always have to pay a premium for it. There is a pretty consistent pattern in my stock portfolio. The stocks that I overpaid for ended up being great investments while the stocks that I thought I was getting a deal on ended up being a disaster of an investment.

aerodog 6y ago

buffet effect. it's insane

gumby 6y ago

Because interest rates are super low and there’s a lot of uninvested capital sloshing around.

deleted 6y ago

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TuringNYC 6y ago

Almost all the big companies I worked for had a "database gang" -- a database group which, in the name of centralization, forced you to bow to them to get anything. New DB? bow to them. More nodes? bow to them. Reboot? bow to them. The internal budget "prices" would be off the charts unbelievable. It makes sense to centralize, but only at a certain cost. Beyond that cost, it is better to just de-centralize because not every project can spend 4-5 months of meetings to spin up a DB. The cloud changed this because it became an OpEx discussion and something you could spin up on your own. For non-production workloads, it comes especially obvious to do this.

stingraycharles 6y ago
This still in no way answers why Snowflake is so valuable, though. I completely understand our argument, and I agree with it; I just don’t think the article’s arguments are anything else than ex post facto rationalization. When they mentioned NPS I almost snorted my coffee, that metric can be gamified in any way you want it.
- stcredzero 6y ago
  >> Almost all the big companies I worked for had a "database gang" -- a database group which, in the name of centralization, forced you to bow to them to get anything. New DB? bow to them. More nodes? bow to them. Reboot? bow to them. The internal budget "prices" would be off the charts unbelievable. > This still in no way answers why Snowflake is so valuable, though. It explains it to a T! You have something you want, but internal company politics and territoriality keep you from getting it the way you want. An outside provider lets everyone get it for a bit of cash. It's basically the same play as Salesforce. It's not some kind of technical moonshot. It has to do with a modicum of technology delivered by a 3rd party who can avoid all of the internal friction. The next founder who can think of this kind of play, then execute on it, will be the next Salesforce/Snowflake, and will probably have the ear of the same investors!
  - stingraycharles 6y ago
    What I meant was why Snowflake specifically is so valuable. BigQuery, Redshift or any other cloud db would fill this gap as well. Why Snowflake?

victor106 6y ago

> Net promoter score (NPS) is a way of measuring customer satisfaction. How easy/hard is it to fake an NPS score? Is this somehow regulated? Can the company only provide its most satisfied customers (which it knows beforehand) and only have them participate to get a good NPS?

stingraycharles 6y ago
NPS can be gamified in any way you want it. If you want to use it as a real metric to improve your product, it’s a great metric. But if you want to use it to convince shareholders your company is very valuable, it’s extremely easy to do so by implementing certain biases.
jmt_ 6y ago
I also have some questions/concerns over the NPS. Online surveys, which is effectively the instrument of NPS, typically yield statistically incorrect data due to, often, some flavor of self-selection bias. If you think of an online survey as an experiment, they rarely allow enough control over the sample to mean much. However, that's not to say it's impossible to properly conduct an NPS, just that it's probably very easy to get wrong which may paint a false picture.
runako 6y ago
Likely this can be easily gamed. But in the context of Snowflake's value, NPS manifests in Net Retention, which is likely to be more difficult to fudge: > For every $1 of revenue Snowflake received from their customers a year ago, that same pool of customers are now paying $1.58. Net Retention is more important, but in this case it also gives credence to the NPS number.
adarioble 6y ago
NPS originally came from car manufactures and industries that produce products that are easy comparable, I.e. how happy are you with the car? Would you recommend BMW to friends? I don’t think it’s that great for software, but it’s very trendy. It can be gamed, like anything else, usually by sending NPS surveys to decision makers who aren’t usually the actual users. Slightly better metric is Customer Effort Score (CEF) which shows how easy is to do business with a company.

physcab 6y ago

I've used Snowflake a fair amount. It's a decent product, probably on par with Redshift / BigQuery. Obviously theres a lot of hype and free money floating around but my take on why they are popular is that they are basically a replacement for large Hadoop installations that have become untenable to manage over the past decade. If a company is already using Redshift or BigQuery I'm not sure why they would switch. I would be apprehensive in investing in Snowflake long term purely because their product is highly susceptible to being obsoleted in the next 5-10 years.

cgenschwap 6y ago
I was at a company that switched from Redshift to Snowflake. It was a night and day difference. Faster (orders of magnitude!), cheaper, and significantly easier to work with (since everyone had their own personal view of the data to mutate/work with). As far as I can tell, it is a unique product in the database space. Extremely well executed ideas and design.
- deleted 6y ago
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- jeffffff 6y ago
  yeah redshift is not at all comparable to snowflake. big query is much closer, it's ahead in some areas and in the last year has closed some of the gaps where it wasn't. big query's biggest problem is that it's tied to gcp which is a distant 3rd in cloud marketshare. they have big query omni coming which is multi-cloud but it'll probably be a while before it's comparable to big query in gcp.
  - philjohn 6y ago
    The other problem with BigQuery is that you can very easily write a query that's going to cost you a lot of money to run - with Snowflake you can let it run for an hour or so, and then realise it was a bad idea and you're only out a few credits, a handful of dollars. The killer feature for me was the query profiler - you can see WHY a query is taking a long time and optimise it - BigQuery just felt like Google were brute forcing the performance, and then charging you accordingly. When the project I was on switched, the micro-clusters (and the ability to recluster a table) as well as the MERGE semantics beat BigQuery hands down - although those features my be out of beta now (but I've moved on to a new gig).

Hizonner 6y ago

I take it I'm supposed to know or care what "Snowflake" is...

AnimalMuppet 6y ago
If you don't know and don't care, you could always not comment...
- Hizonner 6y ago
  The point of the comment is that it would take like 3 words to identify what the thing is, so that you could save everybody who doesn't know what it is from having to do a bunch of research to figure out whether it's interesting to them. It's sloppy writing with no respect for the audience's time.
haswell 6y ago
There are many things that show up on HN that have names I don't recognize. When this happens, I'm excited! I get to learn about something I didn't know about before. A simple Google search for "Snowflake" will immediately answer your question - both by the company being the top result, and by Google conveniently including a card with an overview of the company. There's also plenty of stuff that shows up on HN that I don't care about because it's not relevant to me, but that doesn't mean it isn't relevant to the rest of the community.

zwieback 6y ago

I guess this quote from the article sums it up: "There was so much hype, my mom, who doesn't even know what Snowflake is, decided to invest in Snowflake."

joshdick 6y ago
"Taxi drivers told you what to buy. The shoeshine boy could give you a summary of the day's financial news as he worked with rag and polish. An old beggar who regularly patrolled the street in front of my office now gave me tips and, I suppose, spent the money I and others gave him in the market. My cook had a brokerage account and followed the ticker closely. Her paper profits were quickly blown away in the gale of 1929."

autokad 6y ago

I think part of it is that many know that most companies under perform the market. So I imagine it's not hard to see someone justifying (correctly or incorrectly) that its worth paying more for a company you think is more likely going to be one of those outliers. and being that there is a limited supply of these companies, they can shoot up in value fast. I never used snowflake, so hard for me to have a solid opinion of this company. I remember when facebook IPO'ed and people were like 'what? worth 100 billion? OVERVALUED'. and they were wrong in every way. so who knows? Though my gut doesn't tell me this company is the next facebook. coming out of the gate with a 70 bil market cap feels like all the growth is already priced in. With facebook and on their IPO, I felt just their mobil revenue in 5 years time alone would be worth their valuation. But I had week hands. I think I bought them at 28 and sold at 22. I should have had more conviction because I truly did believe they were worth a lot more.

blackbear_ 6y ago

Am I wrong if I say that they are so valuable (in monetary terms) just because they are the only (or one of the few) non-free database management systems (or whatever they are)?

johncolanduoni 6y ago
Not really, they’re largely targeting the same kind of use cases as redshift and bigquery.
- mr_toad 6y ago
  I ask people if they’ve ever heard of Redshift and BigQuery, and most, even many in IT haven’t. But everyone has heard of Snowflake.
  - johncolanduoni 6y ago
    Sure, I’m not arguing that they’re equally good or equally good at marketing. But they’re far from the only cloud OLAP database.

soumyadeb 6y ago

People are excited about Snowflake because it can completely disrupt the traditional data-warehouse market. The legacy players like Teradata and Exadata (from Oracle) really don't scale. Teradata has ~2B in revenue, Exadata is probably in the same range. That's all up for grabs but that's only scratching the surface. Historically, only transactional data was dumped into the warehouse. Snowflake is selling storage at S3 price (plus you get compression so often ends up cheaper) while they are making money of compute/query. If they can provide all the right query abstractions (SQL, full-text search), in theory all data can be thrown in Snowflake. Yes, tech savy bay area companies can setup their own stack using Presto etc but rest of the world is not like that.

ETHisso2017 6y ago
>>>Yes, tech savy bay area companies can setup their own stack using [insert open source tool here] etc but rest of the world is not like that. It sounds like a ton of these cloud infra companies have this product strategy (datadog, snowflake, elastic, hashicorp, etc)
- Spartan-S63 6y ago
  When you look at cloud infra companies like that, their competitive advantage is in quickly being able to ingest data and make it accessible, so an off-the-shelf solution likely doesn't exist for their particular use-case. Also, since that operation is your competitive advantage, you should look to in-source it rather than reach for a COTS solution.
hilbertseries 6y ago
> Yes, tech savy bay area companies can setup their own stack using Presto etc but rest of the world is not like that. My last company was an early adopter of Snowflake. And we tried Presto first, circa 2016 and Presto was sloooow. We were using vertica at the time and it was so much slower. Snowflake on the other hand was able to perform on the same order of latency as Vertica, which was pretty crazy to us.
- 6y ago

jcfrei 6y ago

I don't see it mentioned in the article but isn't one of the main selling points of Snowflake their data exchange? Companies upload their data to Snowflake in the hopes of someday monetizing it? If that's the case then I think it's just a matter of time until regulators become interested too.

cblconfederate 6y ago

If you were a foreigner and had to invest your savings somewhere (because banks and govs are forcing negative rates) where would you invest

newguy1234 6y ago
I would invest all of it into Snowflake stock, of course. The shoe shine boy told me about it....
wtf_is_up 6y ago
AMT / DPZ 50/50 split
- manigandham 6y ago
  5g and pizza? Interesting combo.

bob33212 6y ago

People want to own the next Salesforce. Snowflake could expand into ERP/CRM/Visualizations. There is over 50B revenue across the world in those areas.

jariel 6y ago
Those lines of business are very far away from Snowflake.
- jacques_chester 6y ago
  They were from Oracle too.

jariel 6y ago

The article talks about 'good things' but doesn't put them in context of valuation. $60B is still too much. It's odd that Buffet is in, it's a weird signal, because this is a weird era for markets: all other things equal, we are looking at .com-ish situations here and the timing would be ideal for a true crash. That the world economy is shrinking by 10% and governments, major industries are going insolvent should be scary. Perhaps investors think they are preparing for the 'covid future' but this may be a weird kind of inflation whereby everything else (including cash) is crap so they are piling into winners. There is an emotion to a lot of stocks these days that is probably making every analysts job a nightmare - if the CEO or company is popular, it really messes with valuation.

panda88888 6y ago
One thing to keep in mind is the price at which Buffet invested. I vaguely remember they he invested at about $70 per share (I may be wrong. Just going by memory here). This means there are a lot of buffer room for correction at current price of around $250.
phonon 6y ago
> It's odd that Buffet is in More like Todd Combs and Ted Weschler...
sjg007 6y ago
I am guessing all of the Berkshire companies are either integrating into snowflake or have.

kthejoker2 6y ago

As someone who spends a lot of time in this space, their only "killer app" is automated workload / data distribution management. Which is cool, and hard to get right, but clearly something the cloud vendors and other data players are have taken steps towards / offer more or less the same outcomes. And in contrast their Silicon Valley roots means a lot of their tooling/UX/data capabilities are ... undercooked. Their Web IDE feels like a throwback to 2003 Hadoop, their ETL capabilities are a joke, they don't support joins in views ... And they've also squandered some opportunities to actually offer a differentiating "all in one" data processing experience for ad hoc/exploratory, BI/aggregated, and Big Data/AI/ML model crunching. For example, here's their garbage blog post on Spark SQL - https://www.snowflake.com/blog/snowflake-spark-part-2-pushing-query-processing/ https://www.snowflake.com/blog/snowflake-spark-part-2-pushin... tl;dr when someone writes a Spark job that includes a filter against data in Snowflake, it's more efficient to let Snowflake filter the data before shipping it off to the (much more performant) Spark engine to do the actual analytical pieces of the query plan, instead of just shipping all the data over and letting Spark do the filtering. Like ... wow, predicate pushdown is your answer? Contrast with Azure Synapse providing Spark and SQL Server compute in the same environment; Databricks adding Delta Lake capabilities to be more schema-on-write friendly; Dremio building AI into their caching, and Starburst into their workload management ... Anyway, I don't see any secret sauce, which means it's still just traditional enterprise sales cycles...

chrisjc 6y ago
> they don't support joins in views Perhaps you mean they don't support joins in Materialized Views (uppercase M)? We use Snowflake views with joins all over the place. Furthermore if views don't cut it for you, you can always use joins in UDTFs. Or if you really need joins in a materialize view (lowercase M), you can use change streams in combination with joins to maintain your own materialized view (table). > instead of just shipping all the data over and letting Spark do the filtering Forgive my ignorance, but in what capacity would this be less efficient? Doesn't it make more sense to reduce you result set before shipping it off to external compute?
- kthejoker2 6y ago

yalogin 6y ago

I don't know anything about Snowflake but in general they are fortunate to go public in this time. The tech market is in a bubble and investors are frothy at the mouth for tech stocks. Pessimism started to creep in for some of the already sky high tech stocks. Snowflake IPO'd right at that time and people just flocked to it.

jng 6y ago

Can someone summarize Snowflake's unique technical value? I'm quite familiar with both Redshift (I would summarize it as Postgres adapted to sharded, columnar OLAP functioning) and BigQuery (there is a famous paper explaining the architecture). Also with more traditional databases such as MySQL, PostgreSQL, SQL Server, and columnar OLAP databases like Vertica. I explored the website a little bit, but couldn't construe a clear statement of the technical architectural value. Some of the comments here are valuable, but I'm missing a clearer "big picture" overview. Thanks!

soared 6y ago
Snowflake’s value is that they provide the same technical products as amazon/google/etc, but are not amazon/google/etc. Some shops like buying into the google ecosystem, some are afraid of vendor lock in. Probably other things, but many companies exist just to be alternatives to faang. If you’re good enough, you surpass that intention.
- jng 6y ago
  I saw them a year or two ago positioning themselves in contrast to Redshift and BigQuery. I though "these guys are building something for Microsoft to acquire" (my thought was, something with a more modern OLAP architecture than SQL Server, which they can offer via Azure). Naive me, they were so much more business savvy than that...
  - sjg007 6y ago
    The snowflake team came from Microsoft.
  - kwillets 6y ago
    SQL Server had too much political pull within the org for such a deal to succeed.
malisper 6y ago
(I'm the author of the post.) I've worked with a large Postgres cluster before (~1PB of data) and have been experimenting with Snowflake recently. I would say there's two clear technical advantages of Snowflake over Redshift. First is there's no maintenance when using Snowflake. You just signup for a Snowflake account, upload a CSV, and you can start querying the data. This is in contrast to Redshift where you have to manually provision a cluster, resize it as you add more data, etc. The second is their pricing. Storing data in Snowflake costs the same as it would cost to store in S3. The tradeoff is you also have to pay based on how long your queries take. Depending on your workload this can result in a massive cost savings. If you access only small amounts of your data infrequently, it's like you're storing the data in S3 and you only have to pay a bit more when accessing the data. This is in contrast to Redshift where you have to pay for the full cost of the cluster regardless of whether you are actually querying the data or not. Snowflake also has a ton of quality of life improvements compared to Redshift. One really nice thing is you can change the amount of compute used for any individual query. For example, if you have one specific slow query, you can allocate 4x the compute for that one query, pay 4x as much while the query is running, and get the query to run 4x faster (ultimately costing you the same amount as if you used 1x the compute). One neat thing is there's ultimately only one "Snowflake instance" in each region. Everyone's tables are in the same instance, but you can only access the tables you have permission to access. This allows you to easily share data between different Snowflake accounts. You can store the data in one account and query it from another. So the core value proposition is really strong and it also has a bunch of extra features that are all pretty useful at the end of the day. This post focused on Snowflake solely from a business point of view. I'm considering writing another one that focuses on it from a technical point of view.

cm2012 6y ago

I did an analysis of Snowflake's Facebook ads if you want to see how they message there and the kind of content they promote : https://www.rightpercent.com/b2b-guides/snowflake-just-went-public-quick-analysis-of-their-facebook-ads https://www.rightpercent.com/b2b-guides/snowflake-just-went-...

suff 6y ago

Snowflake does INLINE hardware provisioning INSIDE the query syntax. Fully managed and mostly automatic. Fire half of your DevOps team. That's why it is so valuable to Wallstreet. Companies that don't use it are wasting lots of money so there will be mass migration. It's more than query optimization, it's also dynamic horizontal query scaling. It's the same reason cloud providers are so much more valuable than rack hosting companies. It's a generational leap ahead in automation.

iblaine 6y ago

Snowflake seems to be part of a segment of companies that are defying economy reality during covid: $TSLA, $ZM, $SNOW. These companies have huge P/S ratios and a higher volume of options activity relative to their underlying stock. A rational person may look at metrics, but we're not in a rational market. The strange behavior of the market may explain these valuations more than anything else. And maybe 3 digit P/S ratios are the new normal. [1] https://www.ft.com/content/b330e091-2a59-4527-b958-9213731a526c https://www.ft.com/content/b330e091-2a59-4527-b958-9213731a5...

pmarreck 6y ago

1) What is Snowflake? 2) What is their stack?

ineedasername 6y ago

For every $1 of revenue Snowflake received from their customers a year ago, that same pool of customers are now paying $1.58. That means Snowflake could acquire no new customers, and they would still be doubling revenue every 18 months. No. That would require customers to grow their spend 58% every year. Might happen early on, especially as projects like this are usually staged in phases so the initial go-live usage is lower than when you get to full production. But projecting long term revenue growth on the basis of average annual 58% increases in per-customer revenue is simply ridiculous.

__Joker 6y ago
Agree. Generally it kind of stabiles around lower than that. For example for cloudflare[1] it is around 110%, while this[2] points to 109 being kind of standard. 1. https://www.sec.gov/Archives/edgar/data/1477333/000119312519222176/d735023ds1.htm https://www.sec.gov/Archives/edgar/data/1477333/000119312519... ( see dollar based retention rate) 2. https://medium.com/@sammyabdullah/109-net-dollar-retention-is-the-new-standard-8c21685e5f99 https://medium.com/@sammyabdullah/109-net-dollar-retention-i...

mathraki 6y ago

The thing to keep in mind is that leadership in data management lasts about 5 years, definitely less than 10. An (incomplete but representative) timeline: - late 90s: Early DWs like Redbrick - early 2000s: Oracle, Teradata - late 2000s: Shared-nothing Data Warehouses (Vertica, Aster Data, Greenplum) - bought up by Teradata, EMC, HP - early 2010s: Hadoop and Hive - late 2010s: Redshift and cloud DBs - early 2020s: Snowflake - late 2020s: probably something else... All these technologies felt they were here to stay at the time, but they didn't. Will Snowflake be the exception? Maybe, but the odds are not nearly as great as their valuation implies.

georgewfraser 6y ago

In order to grow into this valuation, snowflake will need to become the biggest data warehouse company ever. They have a great product and that will probably happen! But you need to be highly confident of the best case scenario happening to buy at the current price.

dash2 6y ago
Yeah, the article seems to be contradictory. First it says “even my Mum, who knows nothing about Snowflake, bought shares.” Then it gives complex technical analysis to explain why the share price is high. Um, I think the first explanation works better.... In general the article persuaded me that Snowflake is a great company. But without some maths relating all these numbers to an estimate of future revenue, there’s no way to tell if it’s a great stock — at the current price. It’s the same problem that Tesla bulls have.

P00RL3N0 6y ago

If I want full ownership of my data, meaning I don't want it managed/hosted by Snowflake, doesn't that mean that snowflake will reference my S3 bucket as an external table? How exactly am I going to be saving money? Snowflake will have to index my S3 bucket, most likely doing a poor job at doing so, all the while charging me for S3 requests just to create an index that I'm already maintaining. My company has strict contractual obligations regarding data de-identification that I have written code to securely index. We use S3 to store de-identified data and the index to query data we have in S3, meaning that we run no risk of our customer data being identified even if attackers acquired access to both the index & S3 bucket. Snowflake may not be trying to handle our use-case, but the corporate account executive spamming my inbox was dead certain that it was our panacea. I'm failing to see where they fit in and I'm glad that my manager listens to me. I also don't see the arguments that Snowflake is beneficial because it is cloud-agnostic. I can count the number of cloud-agnostic employers I've had over my career on 0 hands. If I can't set up Lambda triggers to puts to my S3 bucket, then snowflake is a hard no from me.

snird 6y ago

This article explains why Snowflake is a great company. And there's no doubt about that. But it does not explain why it is valued at 60B$. Or if that value makes sense. To put a price on a company, I need to know in projection for the next 5-10 years what income they will generate to shareholders. The fact that they are a great company does not guarantee they will generate an income to shareholders that value them at 60B$. This is how bubble starts. Overvalue a great company, then overvalue fair companies just not to miss out and "in comparison" with the great companies, and in the end, overvalue nothing (if Tesla is great, then Nikola was the nothing).

Cthulhu_ 6y ago
That assumes the stock market is logical and rational, but you know it isn't. Stock prices are mostly independent from the underlying company's actions and performance, and instead vary depending on investors. The bigger investors have so much money and influence (e.g. operating multiple large 'financial news' / stock news websites) they can sway the prices wherever they want.
- inbx0 6y ago
  So maybe the article should've been Why is Snowflake so Valuable? Stock market is not logical or rational. Thanks for reading.

tekkk 6y ago

This is some ridiculous overvaluation. I've used their product and while it worked all right, I could definitely notice part of their websites and docs being half-assed by not very experienced web developers. Which didn't really conjure an impression of quality to me. More like, "let's do things in hurry to get the money". I don't know how can you, as an investor, rationalize the price by any other reason than speculative increase in share price. Which is again driven by some fundamentals but mostly by hype. If they fail to gain almost 100% increase in revenue for the next year, that 60B is looking way too high. Compare this with something like Splunk. They make high quality product and have over 2B in revenue (with a nice growth curve). Market cap 30B. So is Snowflake as of now worth two Splunks? I don't think so. I could see it maybe being half of that, 15B, if I squint real hard.

kerng 6y ago

How does Snowflake compare to Databricks?

bydlocoder 6y ago

So, at the moment Snowflake beat all the cloud providers at usability, but what stops them from improving their offerings using the tech Snowflake can't match because it doesn't own the hardware? Like, as far as I understand AWS Aurora could only be offered by Amazon because it uses interfaces available only internally. Also, it seems that DWH/analytics landscape changes very rapidly, isn't being "long Snowflake" is actually "short progress"?