MongoDB Files for IPO and Reveals Its Official Strategy for Success

One of the biggest events in any company’s history is the initial public offering (IPO) in which shares in the company are sold to the public and trade on an exchange for the first time.   This generates significant capital for the company, which previously will have been funded by early investors or by existing business revenue.  The IPO is typically the time in which early investors and founders are repaid for their early capital and hard work. 

Not many database companies have gone public over the past 10 years.   Hadoop companies Hortonworks and Cloudera both went public over the past 2 years, but MongoDB is the first “pure” database company to file for IPO for decades.  Other NoSQL vendors are sure to be looking closely at the MongoDB IPO and we might see more database IPOs if the MongoDB IPO is a success.

In filing for its IPO (which was followed shortly after by the start of trading on the NASDAQ Global Market under the symbol “MDB”), MongoDB has been required to disclose both their strategies for growth as well as risks inherent in their IPO.   There’s no shock disclosure here, but they are certainly worth reviewing:  They represent the company’s official strategy for success.

In the headline for the filing MongoDB claims to be the “leading modern general purpose database platform.”  Fair enough: MongoDB defines modern as “this century” and general purpose as excluding big data platforms like Hadoop.  The filing also notes the 30 million downloads of the community edition and the 4,300 paying MongoDB customers as evidence of success.

The prospectus reiterates typical MongoDB pitch points.  When compared to traditional databases, MongoDB claims to provide better performance, scalability, flexibility and reliability.  They emphasize the platform is built “by developers for developers.”  That’s important, because a database built by accountants for salespeople would be a pretty poor database indeed. Joking aside, it is an acknowledgment that developers are the key to MongoDB’s adoption. 

There are again few surprises in the MongoDB growth strategy.  They hope to acquire new customers, build new products, foster the developer community and expand internationally.  Those words might have come from any IPO of any software product.  However, they do specifically highlight the MongoDB Atlas Database as a Service (DBaaS) offering as key to growth.  We can expect to see MongoDB to do everything possible to promote that service.

IPO filings are required to include a consideration of risks involved in the business strategy.  As usual, there’s a lot of obvious and completely predictable risks:  competition from other vendors, failures of sales and marketing, poor product releases, etc.  But they do also spell out some risks that are perhaps more specific and interesting.  They note that they offer free community server and a free Atlas tier and that they “may not be able to realize the benefits” of these.  In other words, their users might use the free versions of MongoDB, ignoring their commercial offerings. This is indeed the dilemma facing all open core software vendors and remains in my opinion the key risk for MongoDB. 

MongoDB has declared a total revenue of about $113 million in the 12 months ending July 2017. After expenses, that is a loss of about $91 million.  It’s completely typical for a growth company to be running at a loss, but it is worth remembering that even with 30 million downloads the MongoDB company is only a tiny fraction of the total database market which is estimated at more than $30 billion annually.  Arch enemy Oracle still has the lion’s share of that far larger market.

MongoDB’s place in the database ecosystem is assured.  No matter what happens over the next few years, there will be websites running MongoDB for the foreseeable future.   The MongoDB IPO will give the company an injection of cash that may help MongoDB reach a next level of significance.  The key for MongoDB is to convince users of the community database to purchase a subscription; time will tell if the IPO helps achieve that objective.