In the case of Snowflake, investors clearly were excited by the company’s market, where its cloud-based data platform competes with both cloud-service providers and legacy database software companies like Oracle Corp. ORCL, -0.41%.
They also were excited to be part of a deal alongside Warren Buffett’s Berkshire Hathaway Corp. BRK.A, -1.03%
— typically averse to both technology companies and IPOs — as well as Salesforce.com Inc. CRM, -2.42%.
Both companies bought 250 million shares at the IPO price, while Berkshire bought 4 million more shares from Snowflake’s former chief executive.
The COVID-19 pandemic has also provided a boost for cloud-software companies, as companies seek to roll out and strengthen already existing relationships with companies that can help employees maintain productivity while working from home. JFrog, like Zoom Video Inc. ZM, +1.21%,
has seen a huge surge of interest in the pandemic, though executives said it is taking longer to close deals. JFrog’s 5,800 paying customers range from giant tech companies like Microsoft Corp. MSFT, -1.04%
to financial institutions like American Express Co. AXP, -1.24%
and Morgan Stanley MS, -1.76%
to industrial firms.
“Software is becoming a really integral part of our lives, and COVID just crystallized the need for digital transformation,” Jacob Shulman, chief financial officer of JFrog, told MarketWatch in an interview Wednesday afternoon. “That’s where our products help customers.”
It isn’t just software, though — the IPO market has been on a major tear this year. Jay Ritter, a Cordell eminent scholar in the department of finance at the University of Florida, said that excluding this week, the first-day returns of IPOs so far this year were averaging about 42% — “the highest average since the internet bubble.”
One big difference from the companies that went public in 1999-2000, Ritter noted, is that many of those young internet companies had very little revenue.
“Whereas this year almost all the tech companies, like Snowflake, have significant sales,” he said. “They are older, they have demonstrated they have a product or a service that sells and while many of them aren’t profitable yet, they have demonstrated they are not just vaporware.”
Ritter pointed out that Snowflake is also realizing another near-record: For money left on the table by the company, referring to the gap between the funds raised in the offering that go to the company, and the surge in the stock after it has begun trading in the open market.
“It looks like it will be in the $4 billion vicinity, just after Visa,” which left $5.075 billion on the table in its 2008 IPO of 406 million shares, Ritter said. Snowflake only offered 28 million shares.
“The market is really paying up for growth,” Ritter said. “Is the market paying too much? It’s really difficult to argue that they are paying too little.”
For investors who want in on these high-flying cloud companies, it is impossible to pay less. But that feels a whole lot like the hysteria for young tech companies and their promises of growth back in 1999.
From GOLF’S HOLY WAR by Brett Cyrgalis. Reprinted by permission of Avid Reader Press, an Imprint of Simon & Schuster, Inc.
In the early 2000s, when Phillips was a renowned teacher working at a club in Maryland, he had a talented teenage student named Peter Uihlein. Peter was the son of Wally Uihlein, the longtime CEO of Acushnet, then the parent company for Titleist. Peter would go on to win the U.S. Amateur in 2010 and turn pro soon thereafter. Long before then, Phillips was already thinking big about the future of golf instruction. He called Wally to come down to the Washington, DC, area, where Phillips had developed a relationship with Dr. Greg Rose, a physical trainer and chiropractor. Rose owned a budding business called Club Golf, where he was making his name working with a lot of long-drive champions. With Phillips’s background as an instructor and Rose’s scientific outlook on the body, the two were already far out in front of the trend concerning biomechanics and the golf swing.
“That’s the future of golf instruction,” Phillips remembered Wally Uihlein saying after he saw how the two worked together. “We [Titleist] need to figure out how to be a part of it.”
Wally Uihlein recognized almost immediately that this type of instruction could exponentially expand his business—and brand.
Titleist had always based their business model on owning a majority share of the golf-ball market. They estimated that the average golfer lost approximately six balls per round. The more rounds a golfer played, the more golf balls he bought, and the more money Titleist stood to make. As players got better, the golf balls they purchased grew more expensive. Better golfers may lose fewer balls, but the market for high-end balls was utterly dominated by Titleist. That was especially true after the sensational release of the Pro V1, when forty-seven PGA Tour players put the prototype in play for the 2000 Invensys Classic in Las Vegas, likely the largest full-scale equipment shift in the history of the game. Once the ball shipped publicly in March 2001, it remained the bestselling ball (along with its later offshoot, the Pro V1x) for close to the next two decades.
So making players better, finding new areas for technical improvement, and allowing people to play longer—it was all about sustaining profit for Titleist through the sale of more golf balls.
Listening to his son’s golf coach talk about the science-rich future of golf instruction, Wally Uihlein found a way to inflate his biggest market advantage. Publicly investing in performance science made it look as if the goal of Titleist was mainly to be at the cutting edge of technology. Titleist could market the golf ball without the consumer realizing that anything was being sold.
“It’s pretty smart for our CEO to sit there and go, ‘We think we should be looking at every aspect of golf, from the physical side to the mental/emotional side—everything to have a golfer love the game more, hit the ball farther, and enjoy the game more,’” Phillips said. “Because if they go out and enjoy the game more, chances are they’re going to be playing our golf ball.”
Phillips speaks with a clipped accent that is hard to place at first. It’s mostly from his parents, who were both from England, where he was born. When he was six months old, his father, working in telecommunications for the British military, moved the family to Kenya. From there, they moved all over Africa, then to the Middle East and the Far East, finally settling in Australia when Dave was in his teens. With tightly cropped and receding hair, an angular face, and deep-set dark eyes, he gives off an aura of weathered worldliness.
Throughout his teaching career, Phillips had always been bothered that no matter how good the instructor, some students improved and others didn’t. It bothered him in the mid-1990s when he worked for David Leadbetter, using Phillips’s own proprietary video software called NEAT (Never Ending Athletic Trainer) to tape eight-hour practice sessions with Nick Faldo during his prime. It still bothered him in 2000, when he was thirty-two years old and became the youngest ever to be named to Golf Digest’s Top 100 Teachers list. The magazine wanted to do a story comparing him and Paul Runyan, who was the oldest on the list at ninety-two, but Runyan died before they could get around to it.
When Phillips met Rose and saw the kind of work he was doing, Phillips finally began to hope instead of despair. Rose’s methods were preemptive, beginning with putting every golfer through a “physical screening” to identify his or her limitations before finding a methodology that might work. Phillips first came to Rose with a low-handicap student who was struggling to implement what was being taught. Right in front of Phillips, the student was put through about five minutes of stretching and strength tests, while Rose took notes. Tall and muscular, handsome with a neat part in his wavy light-brown hair, Rose is undeniably charismatic. He speaks with a smooth authority and leaves little room for argument. At the end of the student’s evaluation, Rose handed his notes to Phillips and said, “That’s what he’s going to do in his golf swing, and if you try to do anything else, you’re going to struggle.”
Phillips laughed when he remembered the story because it was a life-changing moment for him. Rose had written down roughly what was happening with the student. Phillips had struggled to get the student to complete his turn on his backswing, then struggled to get his hips to open up through contact and get his weight to the left (front) leg. As a result, the student often hit a thin shot to the right (or a dead chunk to the left) when under pressure. What Rose had gleaned from the evaluation was that the student had little flexibility in his hips, making it difficult to fully turn; a lack of strength in his left knee (from an old injury) that kept him hesitant to shift hard to his left side; and a slight lower-back problem that had developed from practicing so much without the flexibility needed to execute the instructions Phillips was giving him. Rose physically described why this student wasn’t improving with what Phillips was telling him.
“It was like, you get these moments, like the bright light went off in my head,” Phillips said. “It was like, ‘That’s it! That’s the reason why all these [teaching pros] struggled with some and were successful with others.’ It wasn’t that [Leadbetter] or any of these other great teachers were trying to be bad. They had great techniques. It’s just that they didn’t know because we were never taught. We were golf pros, we weren’t taught about the body and how it works. No one had taught you a simple way of evaluating the body so you could understand why you were different than me. Right?
“So that, to me”—Phillips threw his pen on the desk—“that’s it! That’s the thing!”
In addition to simple physical assessments, Rose was also an expert in 3-D motion analysis. His system, which would eventually be installed at TPI (and would later be replaced by something more sophisticated), was centered around little computing sensors, slightly smaller than Ping-Pong balls, that were attached to clothing. The outfit consisted of a hat, a vest with shoulder pads, sheaths for arms and elbows, gloves, a garter-like piece for the hips, braces for the knees, and thin covers for the shoes. So dressed, a test subject would practice in a room that was set up with special receiving cameras all over the walls and ceiling to pick up the exact location of each sensor. Sometimes a special golf club that carried smaller sensors at the grip and clubhead was used, as well. The motion analysis was similar to what computer programmers used to develop video games.
In real time, an animated stick-figure version of the player would appear on a computer screen. After recording, the movements of the figure could be played back and forth in slow motion. More important, the computer calibrated numerical data about the physical relationships between body parts as they were all in motion. The result was a detailed elimination of proprioceptive dysfunction.
Such technology could collect large amounts of data about the body and its mechanics, but most frequently focused on was a pattern of movement that all great golfers have followed, even if their swing paths were aesthetic opposites. One way the data was manifested was on a graph, with body and club rotation on the y-axis (vertical) and time elapsed going left to right on the x-axis (horizontal). The different body parts were identified by different-colored lines, so as the player started the backswing, the lines would move from left to right (along time) and dip below the equator in varying degrees of curved parabolas depicting the amount of rotation back. Then the lines curved up and started to rise when rotation slowed down, and then overlapped at the equator, showing the top of the swing when rotation started to move in the other direction. The lines then crossed the equator and hit a peak height at impact before slowly descending again. So down, then up, then down again, like a bunch of multicolor sideways S’s that varied from fat to skinny depending on the amount of rotation with each body part.
What teachers were looking for—and what the graph made easy to understand—was any deviation in the kinematic sequence that all great golfers have found intuitive. First the hands move, then the arms, shoulders, hips, knees, and feet. The sequence goes in reverse on the way down: feet move first, then knees, hips, shoulders, arms, and hands. The data from the 3-D motion sensors can be extrapolated to create a separate graph of each body part being monitored, with a more detailed analysis of the movements, making the kinetic and sequential comparisons more specific than the original graph. What looks good on the big graph might have small variance depicted in the smaller graphs.
Overall, 3-D motion tracking allowed experts to further analyze the swing in a deeper, more concrete way than with just video and the naked eye. The live swings of Jim Furyk and Ernie Els could hardly look more different, yet their data-plotted graphs are almost identical. Leadbetter called it “syncing.” With the graphs, it was easy to show a student how his or her hips stopped rotating before impact, and how that threw off the rest of the sequence, likely forcing the arms to get out in front. The lines would get all jumbled and the arcs wouldn’t coincide. Such technical language didn’t always make sense by itself, such as in trying to explain how and when the rhythm went askew. Tempo is an abstract, but it becomes far more tangible when illustrated with colors and charts.
Rose was exceptional at interpreting this information and disseminating what it meant to the big picture of a person’s golf swing. If the graph showed a lack of pelvic rotation, it might be due to a lack of flexibility in the hips, which Rose would have detected in a physical screening. If the hands stopped rotating, it might be due to an old injury in the player’s wrist. The information being collected from physical screenings and 3-D motion analysis better explained exactly what was happening in the golf swing, and Rose then used it to explain why people moved in a certain way—and why that didn’t always coincide with what they were trying to do, or what their teacher was saying.
With Phillips’s background in technical swing mechanics, the two brought the whole process of improving as a golfer into clearer focus. They could now understand what swing motions might work and not work depending on physical limitations and understand how to keep a player from suffering an injury. They could now tailor the golf swing and any possible improvements to each person’s individual biomechanical makeup. This targeted instruction was exactly what Phillips had been searching for, and he knew it when he left Club Golf that first day.
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