As IPO season continues, another venture-backed tech company is moving closer toward going public. This week nCino filed an updated S-1 filing, providing an initial price range for its equity of $22 to $24 per share.
Indeed, nCino, a fintech startup that provides operating software to banks, intends to sell 7.625 million shares in its debut, worth $167.75 million to $183 million at those prices. Including shares offered to its underwriters, its haul grows to between $192.9 million and $210.5 million.
Discounting the extra shares, nCino is worth between $1.96 billion to $2.14 billion at its current price range.
The startup’s software is what nCino calls a “bank operating system,” providing banking software to help financial entities with lending, customer resource management, account opening and more. It’s a rich space for innovation, given the banking industry’s complexity and wealth. Smaller startups are also working along related lines.
Normally at this point in an IPO process we compare the debuting company’s valuation range with its final private valuation. However, it’s hard to find out what nCino was worth. PitchBook and Crunchbase are bare regarding its last private round, as are other data sources we checked.
Notably, nCino has no preferred stock, so spelunking through different series of preferred equity sourced from S-1 data wasn’t possible. However, the company was healthy — and therefore, valuable — enough to raise more than $130 million across two rounds in 2018 and 2019, including an $80 million round from last October led by Chip Mahan and T. Rowe Price.
Regardless of where nCino priced toward the end of its life as a private company, its IPO is a likely win for both Salesforce and Insight Partners. The corporate venture arm of Salesforce and the well-known venture group own 13.2% and 46.6%, respectively, of nCino’s equity before IPO shares are counted; expected ownership for the two groups falls to 12.1% and 42.6%, respectively, when including anticipated IPO equity.
According to Crunchbase data, Insight Partners led nCino’s Series B and C in 2014 and 2015, while Salesforce Ventures led its $51.5 million 2018 round; Salesforce also took part in several of the company’s early rounds, helping to explain its double-digit stake in the firm.
So what?
Modern software companies, often called SaaS firms, set new valuation records this week on the public markets following earlier highs set in Q2. Their performance hints that nCino could find warm welcome from public investors.
Does that fact fit with the valuation that the above-detailed pricing indicates that nCino may achieve? Annualizing the company’s Q1 (the April 30, 2020 period) revenue results, nCino’s $178.9 million run rate would give it a revenue multiple of 11x to 12x at its expected IPO prices, a somewhat modest result by current standards.
Indeed, as nCino grew about 50% from Q1 2019 to Q1 2020, it feels light. The firm’s GAAP losses are slim compared to revenue as well for a SaaS business, though the company’s operating cash burn did grow from $4.6 million in its fiscal year ending January 31, 2019 to $9.0 million in its next fiscal year. Its numbers are mostly good, with some less-than-perfect results. Still, given its growth rate, an 11-12x revenue multiple feels modest; that figure rises, of course, if we use a trailing revenue figure instead of our annualized number.
It would not be a shock, then, if nCino targets a higher price interval for its shares before it formally prices. The firm is expected to price next Tuesday and trade the next day, the same time frame as GoHealth. More when we have it.
