The Oracle of Omaha, Warren Buffett, known for occasionally partaking in ice cream from Dairy Queen, is going in for a Snowflake scoop. Snowflake is a red hot data warehousing company viewed as one of the best next-generation enterprise companies to tap the public markets in 2020.
In an amended S-1 filing, Salesforce Ventures and Berkshire Hathaway are buying 3.125 million shares each at $80 a share. That is $250 million each. Berkshire Hathaway will also purchase just over 4 million shares of common stock from one of the stockholders — bringing Buffett’s total to about $500 million into the new company. The company is going to be selling 28 million shares for between $75 to $85 a share, which will value the company well north of $20 billion.
Benoit Dageville, Thierry Cruanes, and Marcin Zukowski (all formerly with Oracle) cofounded Snowflake in 2012. They were betting on the explosion in the amount of data and the cloud. A decade ago, companies like Teradata and Netezza helped corporations achieve insights from their data, which primarily resided on their private infrastructure. Since then, the cloud has become key to any infrastructure, and the amount of data has exponentially increased.
Three major cloud providers — Amazon, Google, and Microsoft — also have big data offerings in Redshift, BigQuery, and Azure SQL. Snowflake managed to use its neutral position to become a big player by better execution and better focus.
Snowflake is a good template for fully-managed cloud services. Its rivals, such as Databricks, sell software and customers get their servers. Snowflake does everything, including managing the servers. As consumers, we are used to this “server-less model” when we buy our cloud services. Snowflake has done that for companies big and small. They have done an excellent job of pricing it well and making it feel more secure for the cloud-skeptics.
Of course, Snowflake’s ongoing success doesn’t mean that the big cloud players are going to keel over. AWS Redshift is big business, and as a standalone company, don’t be surprised if the size of its revenues is closer to Snowflake. On the other hand, Google is in the process of finding ways to get BigQuery available on other platforms.
Snowflake, meanwhile, benefits from being led by CEO Frank Slootman. I got a chance to spend some time with him when he was running ServiceNow, and it was easy to see why he is respected in the industry and by investors.
(An interesting aside: Mike Speiser, who was one of Snowflake’s catalysts, is having quite a summer. He is also an investor in Sumologic, which has filed to go public as well. Mike, who joined Sutter Hill Ventures from Yahoo, is quite a storage nerd. He sold Yahoo to Bix, which is when I first met him. Later, he wrote a seminal piece for my old publication. He talked about the rise of SSDs in the data center and its long term impact.)
When I read the news of Berkshire’s investment in Snowflake, I had a couple of thoughts.
First, Berkshire’s investment will be a big boost for the Snowflake offering, especially in light of the fact that Buffett’s group has often eschewed the technology sector. It has been an investor in communication and telecom providers, such as Liberty and Verizon. However, they did acquire a sizeable Apple position, whose dividend alone to Berkshire Hathaway in 2019 was nearly a billion dollars. In 2019, he famously pointed out that “In 54 years, I don’t think Berkshire has ever bought a new issue.”
Secondly, Berkshire’s embrace of Snowflake — which is still loss-making, but fast-growing and well-established — is a sign of the times: no matter where you look, the future engine of growth is coming for technology and all that it enables. We are experiencing a historic shift away from a traditional industrial economy to one with a digital heartbeat.
Berkshire Hathaway might have a propensity for more traditional businesses — after all, people still want to buy insurance, fast food, and homes — but they are being transformed by technology and data. The power of data to transform business was one of the key reasons I started the (sadly defunct) Structure conference back in 2008. From storing it (data warehousing), making sense of it (analytics), and building applications and services with it, data is a core part of the future of industry and business.
And that’s why Buffett wants a scoop of Snowflake.