For the last week, Gitlab has been the star of the startup world. Having filed to go public early last week the private software unicorn surpassing most expectations at around $108 per share as per Friday afternoon. This puts the DevOps giant at a valuation well over $12 billion; twice it’s worth just a year ago and quadruple its $3 billion valuations in 2019.
Now before we delve into the specifics of this news, I am sure some of my audience are not quite acquainted with Gitlab, what it really does and why investors are going crazy for their shares.
For these people, I feel it is important to briefly describe Gitlab and what it does. Nerds can jump straight to the news section.
What is Gitlab?
A quick internet search and you get this definition:
GitLab is a web-based Git repository that provides free open and private repositories, issue-following capabilities, and wikis. It is a complete DevOps platform that enables professionals to perform all the tasks in a project—from project planning and source code management to monitoring and security.
But this doesn’t help much, does it?
Well maybe if we first define what a git is we can make things a little clearer.
What is Git?
Git is a version control system used to track changes in computer files. Git’s primary purpose is to manage any changes made in one or more projects over a given period of time. It helps coordinate work among members of a project team and tracks progress over time.
With this definition, we can then infer some meaning to GitLab. A platform that “enables professionals to perform all the tasks in a project” while also allowing for collaboration on various projects.
On to the news.
Why did Gitlab go Public?
Gitlab’s decision to go public and consequent success at this venture has been inspired by its successful operation metrics.
Talking to techcrunch.com GitLab CEO Sid Sijbrandij details that the company’s performance inspired their decision to go public.
“It hit all the marks, Sijbrandij said, including revenue scale, revenue predictability and compliance. And the IPO date wound up being 10 years to the month from when co-founder Dmitriy Zaporozhets wrote his first code for the company. So that’s a nice circle of timing. Humans do so love round numbers.”
With net retention of 148% in 2020 rising to 152% in the first half reports this year, Gitlab has been showing no signs of slowing down.
Why have they been so successful?
While not discounting the talent and hard work of the people at Gitlab its success over the years can also be brought down a significant rise in the popularity of open-source code. Initially, open-source code was looked down upon with suspicion among company executives. However, the rise of platforms like Gitlab show that open-source is the future.
Open-source code is now key for companies looking to build strong long-term working relationships with developers. Even Microsoft, current owners of rival Github, saw this trend and changed tune some years ago.
What can we learn?
Public Markets are way warmer than private markets. In a private offering, Gitlab doubled its value from approximately $3 billion to $6 billion from 2019 to 2020. This is however pale in comparison to the subsequent doubling this year, this time in the public market. The company essentially quadrupled in value in just three years.
What this shows at minimum is that public markets have a similar appetite for high growth SaaS just like private markets.
A lesson for Startups going Public?
Gitlab’s success at their IPO may finally refute the claim that startups must begin at the bottom in IPOs. They can go in big, in multiples and start right at the top.