In the Stanford course: How to Build Successful Startups, John Kelley led us to study a recent successful startup: Snowflake. Because it’s a B2B startup, it’s less known, such as Airbnb IPO also in 2020. Nevertheless, Snowflake did make a few records. For example, it’s the biggest SW IPO ever & Snowflake’s stock price was doubled on the 1st trading day. Today, its market cap is more than 100B.
So what is Snowflake really? As founded in 2012, Snowflake offers “data warehouse-as-a-service”. In other words: it’s a platform providing cloud-based data storage and analytics services on 3 cloud providers: Amazon Web Services (AWS), Microsoft Azure & Google Cloud. Let’s extrapolate a bit. Maybe, there are some useful tricks for new ventures.
A new flavor of software as a service
“History doesn’t repeat itself, but it does rhyme.” — Mark Twain
Software as a Service(SaaS) has been a new way to redefine & create businesses. For example, Snowflake’s data warehouse-as-a-service is still a form of SaaS, but not only SaaS as Snowflake claims. It disrupts the business by only charging customers for the resources they use, aka the consumption-based business model. Which makes Snowflake successful in “reinventing database”. Nevertheless, Snowflake is not the first to disrupt the “database business”, and will not be the last. Furthermore, a similar transformation can & will happen in other fields.
- In 1974, IBM started IBM System R as an experimental database system with the 1st implementation of Structure Query Language (SQL).
- In 1979, Oracle V2 was introduced as the 1st commercially available relational database system with SQL inside. Today, Oracle is still the most popular relational database management system.
- In 1999, Salesforce was founded by Marc Benioff. Instead of selling Customer Relationship Management (CRM) software, Salesforce provides CRM SaaS. Interestingly, the idea was sprouted on his Hawaii vacation as an SVP of Oracle. In 2020, Salesforce’s market cap topped Oracle & exceeds 280B today.
A platform architecture
As a startup, Snowflake has to ride on the great public cloud migration wave instead of swimming against the tide. For example, to solve the decades-old problem of data silos & governance, Snowflake architect its cloud-native solution into 3 scalable layers from storage, computing to cloud services. The ingenuity of Separation of Concerns enables Snowflake to meet customers where they are as a value-added to AWS, MS Azure & Google Could. Which turns the cloud giants into Snowflake’s partners.
Your problem is my opportunity — adoption
Adoption is a key success metric for a platform. Anyone can build a platform, but a platform can only create value if there are enough interactions between producers & consumers. First, Snowflake makes its customer adoption decision easier by clear value propositions powered by its efficient utility model. As an analogy, most people will buy milk instead of raising a cow (HW & SW assets) nor hiring a cow caretaker (talents).
- For large customers, a big saving from eliminating the overhead of copying datasets across silos & maintenance cost to near-zero.
- For rising stars, its versatile cloud services accelerate their cloud strategies to deliver new revenue-generating services.
Better together — the network effect
When the customer base grows, the potential of network effects also grows exponentially. As a platform steward, Snowflake’s next ambition is to level up its Data Cloud to a “Data Marketplace” by enabling data exchange & creating new value within the ecosystem. For example, data sharing is a built-in function, Snowflake Data Marketplace listing grew 10x in 2021. Even it’s still small today, but as it accelerates as a part of growth, it’ll eventually become a great economic moat for Snowflake.
Full Disclosure
The opinions stated here are my own, not those of my company. They are mostly extrapolations from public information. I don’t have insider knowledge of those companies, nor a whatever expert.
