Everything You Need To Know About The Samsara IPO
By Kate Kaye,
When Samsara got its start in 2015, its founders said they wanted to outfit the world with the company’s data-generating sensors, cameras and other means of tracking, connecting and analyzing physical things like equipment, vehicles and the workers using them. Now, as expected, the internet-of-things company has filed for an IPO and scored a coveted ticker symbol: IOT.
As time went on, the idea of slapping a sensor or camera on everything was too grand a proposition for a small startup, so Samsara’s co-founders John Bicket and Sanjit Biswas — former MIT grad students who founded and sold cloud networking software company Meraki to Cisco — reined in their IoT-everywhere ambitions. They’ve since narrowed the company’s focus to fleet management, and built a base of commercial and government customers using its technologies and analytics services to manage their vehicles and drivers.
Samsara filed its S-1 on Nov. 19. The company has not revealed how many shares it plans to list or a target price, but reports indicate it aims for a valuation of “much higher” than the $5.4 billion valuation it attained during a hefty funding round in 2020 of $700 million.
WHAT DOES SAMSARA DO?
The company provides sensors and cameras that generate data reflecting various operational parameters of physical assets owned by businesses, such as delivery vehicles, construction truck fleets or physical locations. Samsara ingests the data showing truck fuel use or video of speeding delivery drivers into its Connected Operations Cloud, then provides analytics services, alerts and reports to help customers use the information. Samsara’s products can be integrated with other hardware and software applications such as systems used by engineers or data scientists.
Restaurant supply company Sysco uses Samsara’s video-based technology to monitor for driver distraction, capture road video, label it and store it in the cloud and even score employee drivers based on safety metrics. Construction industry clients including crane and hauling company Bragg Companies use Samsara’s GPS-based vehicle telematics technology to track when trucks show up to a construction site or monitor engine diagnostics to reduce idling time and cut down on fuel costs and emissions. The company also helps companies gauge truck temperatures to ensure food stays chilled, and monitors equipment such as generators in order to improve operational efficiency.
Employees: The company said it had 1,490 employees, 694 of which were salespeople.
Partners: Samsara has integrations with 125 third-party applications through its App Marketplace. It also partners with OEMs including John Deere, Ford, Caterpillar and Volvo, which embed Samsara sensors and connectivity services into their vehicles.
HOW DOES SAMSARA MAKE MONEY?
Samsara relies on a subscription-based business model, selling access to its operations cloud to customers at a monthly, quarterly or annual subscription rate priced per asset and per application. For instance, if a delivery truck has the company’s video safety and vehicle telematics applications installed, that would count as two subscriptions.
Customers: Samsara reported it had more than 13,000 customers with subscriptions to its Connected Operations Cloud as of October 30, 2021.
The company aims to attract more customers that spend at least $100,000 in annual recurring revenue per year. The number of customers in that category has grown from 390 in Q3 fiscal 2021 to 715 in Q3 fiscal 2022.
Ultimately, Samsara aims to upsell customers, convincing them to switch on additional software features or purchase more hardware like dashboard cameras. However, the company could struggle to attract a substantial number of larger enterprise customers that reap big, annual contracts. It counts any customer paying “over $5,000” in annual recurring revenue among customers with subscriptions to its Connected Operations Cloud — not exactly a typical enterprise-sized contract amount. Indeed, noted Samsara in its filing, “We believe there is still significant room for growth.”
Still, industry watchers point to the company’s horizontal approach as a plus which could bolster its chances to grow. Because Samsara started with bigger goals beyond fleet management rather than building only for a singular, industry vertical use case, it is able to develop new features or products that roll out in a unified format and can be used together. The ability to buy fleet telematics services from the same company that helps monitor building equipment could be an incentive for customers to grow their contract size with Samsara.
Samsara’s revenue more than doubled from $119.9 million in fiscal 2020 to $249.9 million in fiscal 2021.
The company generated the bulk of its revenue in each of the past two fiscal years — approximately 98% — from subscriptions to its Connected Operations Cloud.
However, Samsara has yet to turn a profit.
Samsara incurred net losses of $225 million in fiscal 2020 and $210 million in fiscal 2021.
The company expects to lose more money in the future as it spends on tech and product development, hiring more salespeople and other employees including in its customer support team and expanding marketing efforts.
As of October 30, 2021, Samsara had $267.5 million in cash and cash equivalents.
WHAT COULD GO WRONG
Lax sales demand: Growth for Samsara will be contingent on hiring more direct salespeople in the U.S. and overseas, something the company said it aims to do. It also will be contingent on successful upselling; that is, getting existing customers to ramp up what they spend with Samsara by purchasing additional IoT devices and paying to use additional applications. This, Samsara noted, “will require us to invest significant financial and other resources.”
Manufacturing delays: Not only is sales success crucial, Samsara must ensure that the products customers agree to buy can get made. The company depends on a limited number of suppliers of manufacturing services and critical components. And it’s already run into problems. In Q4 of fiscal 2021, the global silicon component shortage led to delays in shipments of Samsara IoT devices.
Competition: Ultimately, Samsara competes with much larger companies providing IoT and fleet telematics services including AT&T, Verizon Communications and Motorola Solutions – companies that not only have leverage to ensure their IoT devices get made, but could sell their existing customers on the same types of services Samsara offers. Plus, OEMs could decide to acquire or build their own fleet management technologies rather than partnering with companies like Samsara. Gartner expects that by 2026, OEM-provided telematics systems will grow to more than 25% of the market.
WHO GETS RICH
Samsara has yet to release its target IPO price as well as the number of shares outstanding, so it is unclear exactly how much key stockholders stand to gain. These are the company’s major holders, all of which hold more than 5% of the company:
Entities affiliated with Andreessen Horowitz (including AH Parallel Fund): 82,186,265 shares
Entities affiliated with General Catalyst: 45,428,587 shares
WHAT PEOPLE ARE SAYING
“Samsara stands out in the way that it has integrated many capabilities into a single platform, including AI and image analysis. Adopting a single supplier for fleet management applications simplifies procurement and the management of the enterprise technical environment, and helps to avoid data silos.”
— Jim Morrish, Internet of Things industry analyst and founding partner of Transforma Insights
“The digital transformation of physical operations won’t happen overnight, and we are committed to work at a sustained pace to help make it happen.”
— Bicket and Biswas in their founders’ letter.
Source : https://www.protocol.com/enterprise/samsara-iot-ipo?rebelltitem=2#rebelltitem2
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