ALL EYES ON THE ENTERPRISE

A BIG WEEK FOR VENTURE-BACKED SOFTWARE COMPANIES

This week we saw two six-figure fundraising rounds from 2021 CNBC Disruptor 50 companies. Low-code software company Airtable (ranked No. 46 on this year's list) raised a fresh $735 million, boosting its valuation to $11 billion, while open-source enterprise tech company Cockroach Labs (ranked No. 27 on this year's list) raised $278 million, more than doubling its valuation to $5 billion from $2 billion earlier this year.

Both rounds are the latest examples of a red-hot private market of enterprise software companies that are raking in cash — and proof that the correction that has been occurring in publicly traded high-multiple software stocks hasn’t trickled down to the top end of venture-backed software companies, which continue to attract these big valuations after a 10-year-plus bull market.

What's more, as we reported last week, Databricks — which ranked No. 37 on this year’s CNBC Disruptor 50 list and has raised $2.6 billion from investors this year — is putting its money where its mouth is, announcing last week that the company is getting into the venture capital business with its new Lakehouse venture fund, named after its proprietary open-source project called Data Lakehouse.

In a new 2022 outlook report on software technology released earlier this week, JPMorgan analysts including Sterling Auty and Jackson Ader lowered their ratings on 13 companies, while upgrading just five. Inflation and concerns about interest rates have led investors to put 2021 behind them and focus more on the coming year. That’s drawn them out of high-growth, high-multiple stocks and into sectors that are generally viewed as more resistant to inflationary pressures and rate hikes.

“The reasons for the downgrades include a combination of limited upside to our price targets, valuation in light of risk that interest rates rise in 2022, adjusting discount rates for the current rate environment and re-evaluating reasonable cash flow expectations,” the analysts wrote.

CNBC's Jim Cramer recently said the sell-off is reminiscent of a period in late 2018, which turned out to be a good buying opportunity for many cloud companies. However, he stressed it’s not clear when this period of weakness will subside and more pain could be ahead. For that reason, Cramer said investors who want to try capitalizing on the decline should focus their attention, for now, on those with “reasonable valuations.”

The “Mad Money” host and his team compiled 50 stocks in the cloud space, some of which include Disruptor 50 heavyweights like Okta and UiPath. All but one of the analyzed companies was down more than 10% from their highs earlier this month. The average decline at that time was 33%, Cramer said.

“In short, if you want to start picking among the rubble in the cheap cloud stocks, well, these have already come down enough to be worth buying very gradually on the way down,” Cramer said. Additional stocks appear reasonably valued when considering 2023 sales estimates, Cramer said, which is fair to look at “because in a month, 2023 will be next year.”

CHART OF THE WEEK

THE WISDOMTREE CLOUD COMPUTING FUND

DISRUPTION IN ACTION

THE REST OF THIS WEEK'S HEADLINES

H&R Block sues over Square’s new name ‘Block’

TWO-TIME DISRUPTOR 50 COMPANY

H&R Block has filed a trademark infringement lawsuit over Square’s new name, “Block." The tax preparation service seeks to keep Block from using the new name, saying in a press release that the fintech company “would improperly capitalize on the goodwill and consumer trust cultivated by Block since 1955.” It alleged the name would be overly confusing for consumers, especially given the two companies’ overlapping offerings.

Plant-based packaging-maker Footprint going public via $1.6 billion SPAC

RANKED NO. 45 ON THIS YEAR'S LIST

Footprint, an Arizona-based materials science technology company known for its plant-based packaging, will make its market debut by merging with blank-check firm Gores Holdings VIII. The deal is expected to value Footprint at $1.6 billion following the SPAC merger’s completion. The company is expected to begin trading on the Nasdaq in the first half of 2022 under ticker symbol “FOOT.”

Peloton CEO John Foley touts product pipeline, company refutes report that it’s halting development

TWO-TIME DISRUPTOR 50 COMPANY

Peloton says it's not halting development of new connected fitness products next year, contrary to a report published by DigiTimes. The company has been rumored to be working on a rowing machine. Early next year, it’s also expected to begin selling a strength training device called Peloton Guide, in a bundle with a new heartrate arm band.

Why BuzzFeed’s poor debut doesn’t necessarily spell bad news for new media

MADE THE 2013 DISRUPTOR 50 LIST*

BuzzFeed fell 39% in its first week of trading, closing at $6.07 per share, an inauspicious start for the prospects of digital media companies on public markets. But even if its valuation is disappointing, Buzzfeed’s debut gives peers something they didn’t have before: a public market valuation comparison. *The 2013 Disruptor 50 list was unranked.

Instacart president Carolyn Everson announces departure just three months after she started

RANKED NO. 50 ON THE 2016 LIST

Instacart president Carolyn Everson is stepping down at the end of the year, just three months after she joined the grocery delivery service company. The latest shake-up in Instacart’s C-suite follows the exit of the head of advertising, Seth Dallaire, who left for Walmart in October. Everson spent more than 10 years at Facebook as its ads chief and was Instacart CEO Fidji Simo’s most high-profile hire.