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Alteryx: Prepping For An IPO? I Sure Hope So

As the title implies, if privately-held data prep, cleansing, and workflow-optimization engine Alteryx isn't preparing for what should be one of the most anticipated IPO's of 2016 it sure is doing a great job of pretending it is; to the point where I'm going to be disappointed if it doesn't hold an IPO during 2016. And maybe I'm saying this from a selfish, just-wanting-to-get-in-at-ground-level-valuation standpoint (or as close to ground level valuation as possible - Alteryx was reportedly valued at $1 billion during its last funding round) but I think that the time for Alteryx to hold an IPO couldn't be more ideal than it is right now. I'll explain.

First, Alteryx doesn't need to go public in that it doesn't really need anything. It has funding. It has an impressive list of quasi-consultant, in-field-expert financial backers. It has a sizeable (and growing) customer base with some marquee value. It has a (what I would call based on my networking with a fair amount of sales reps) mature sales rep base. It has competent management that could make the transition from running the show on the private side to running the show on the public side (this most definitely isn't always the case folks). It has an already existing, already-being-realized-in-execution monetization model that isn't going to require the company to fill the cash coffers in advance of "figuring it out" (READ: the overwhelming majority of 2014-2015 tech IPO's single largest reason for going public). I mean, Alteryx may or may not be running at huge losses because of an unadjusted growth rate (put simply, the company might not be ran at "breakeven" like a Paylocity (NASDAQ:PCTY) was into its IPO - to give one ran-at-"breakeven" recent SMB/enterprise solution, tech-IPO model example) but we know that even if it is generating losses into growth that it has at least cleared the hurdle of figuring out how to actually charge for services. Which is huge. Let's be clear here, Alteryx doesn't need to go public.

But again, it should. And I think it will. Why? Several reasons.

The first is that it's at an operations maturation where it can meet public company expectations. I mean this across the board. Alteryx has the company infrastructure in place - again things like a mature sales team, a multi-location office network (including international), a set and widely-adopted pricing plan (this is huge), a set (and expanding) product portfolio, no (at least at this point) visible near-term scale limitations for growth, etc. - to be consistent with underlying operations. Viewing Alteryx as a potential long position from a capital exposure standpoint is one that doesn't have any visible "risking-on" when considering operations; again, at least in the near/mid-term. That Alteryx is operationally "derisked" to a large degree for the current and immediate-term scale is going to be a huge PubCo valuation driver. If Alteryx's advisors (and its newly hired CFO) aren't telling it that this means it will be an institutional darling upon IPO - they should be.

Alteryx, as a result of the above, is also at a point where 1) having the ability to be valued at a multiple and 2) having the ability to tap that valuation multiple via using its share float as a currency makes a heck of a lot of sense. Paycom and Zendesk (NYSE:ZEN) are two excellent, recent SMB/enterprise solution tech-IPO's for exampling what I'm trying to describe here. Like Alteryx, Paycom and Zendesk had product set maturation profiles that were established enough but not on the other side of growth at IPO. What this meant was that both companies could continue to prove out growth and could continue to prove out market share take quarter after quarter (after IPO) while having an efficient valuation mechanism reflect the positives of both. As their respective shares prices grew both companies gently tapped share issuances to pay for things like onboarding talent, accelerating growth (via infrastructure additions), etc. Being efficiently valued (by what is assumed an efficient market) allows both companies to this at presumably a lesser dilution to ownership than would have been accomplished on the private side. Put simply, I think if Alteryx were public as of today that it could tap its stock during the next handful of quarters (post reporting and shares moving higher) to drive growth and market share take at the richest valuations (and by way of that the lowest rates of dilution) in company history. I don't think that's too far a stretch of the imagination.

Finally, if you've followed Alteryx at all you know just how cozy the company is becoming with the major "upstream" platforms in the data/analytics space. If the data/analytics space is a three stream channel - downstream, midstream, and upstream (to borrow phrasing from my energy background) - Alteryx is the midstream gold standard. While it isn't a data-visualization platform by any means it certainly is the single best engine for the "data prep, cleansing, and workflow-optimization" noted in the introduction of this note. To get to the "upstream" you have to have a competent midstream option. Tableau (NYSE:DATA), Qlik (NASDAQ:QLIK), and Microsoft (NASDAQ:MSFT) have realized this and have built close to native integration with Alteryx. In fact, my guess is that Microsoft owns Alteryx within 18 months (shhhh…don't tell anybody). You don't think that Alteryx ownership will benefit from being a publicly traded company that trades at forward looking multiples in a takeout scenario? Being public, for this reason alone, makes cents…I mean sense.

Alteryx is the single best way for those tasked with leveraging data/analytics to create business outcomes to have the ability to complete complex functions with data itself. I believe, and apparently so too does Microsoft, Oracle (NYSE:ORCL), IBM (NYSE:IBM), SAP (NYSE:SAP), etc., with their collective entrance into BI and other technology of its ilk, that this is soon to be every single worker in the productivity chain at every single enterprise. Even better, the Alteryx platform doesn't require the user to have any background in what is most easily described to the mass markets as "data coding". In fact, Alteryx offers an ecosystem of pre-written "coding" and/or "workflows" (the command chains built within the Alteryx platform via its "canvas") via its website for users of its platform. Imagine an app store filled with "apps" that provide micro-engines for executing different data-based use cases - quite literally this is what Alteryx has setup for users. Alteryx is a unique engine that, at least to my knowledge, has no direct peer. Effective, unique, scalable, open architecture from a use case standpoint, etc. - these are all reasons Alteryx has been able to gain traction and has been able to resonate with users of all sizes.

It's only a matter of time before one of the above mega-cap tech names decides that what Alteryx does should be what it does. That Alteryx's platform and technology are a competitive advantage for their respective ecosystem. That it has to, again, pony up the valuation multiple to finance the wedding. I think Alteryx knows this and that's why I think it recently hired a CFO (and even announced a major office opening in Germany to follow a major office opening in Denmark). Alteryx is sitting pretty in being fully prepared to go public - if this is something the company decides to do. I think it will.

Stay tuned.

Good luck everybody.