- Salesforce and Berkshire Hathaway have both agreed to purchase $250 million in shares at the time of Snowflake's impending IPO, according to an amended filing released on Tuesday.
- Snowflake is one of the most-anticipated tech IPOs of the year, with all eyes on its software for managing data in the cloud and making it easier to analyze.
- News of the investment came as Snowflake also set an initial price range for its shares of $75 to $85. Based on that range, Snowflake would be valued between $20.9 billion to $23.7 billion.
- Analysts say Salesforce and Berkshire Hathaway's investment shows just how important data has become to businesses and the need for technology like Snowflake's to manage it, and gives the company some validation in the run-up to its public debut.
- For Salesforce specifically, it also lays the foundation for a stronger partnership with Snowflake down the line, experts say.
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Salesforce and Berkshire Hathaway have both agreed to purchase $250 million in shares in Snowflake's IPO, according to an amended filing released on Tuesday. The data warehousing company as our colleagues at Markets Insider previously reported.
In an amended S-1 filing, Snowflake says that Salesforce and Berkshire Hathaway are each expected to purchase 3.1 million shares, which at $80 per share — the midpoint of its range — adds up to the $250 million figure.
Berkshire Hathaway is also purchasing another 4 million Class A shares from former Snowflake CEO Bob Muglia in a secondary transaction, set at the IPO price for each share. That could cost $303 million to $344 million based on the expected price range, so Berkshire Hathaway's total investment in Snowflake shares could be up to $550 million to $590 million in total, as Markets Insider reported.
Snowflake's last private valuation was $12.4 billion in February after a funding round that notably included Salesforce Ventures, the cloud software giant's investment arm.
Analysts say Salesforce and Berkshire Hathaway's investment shows just how important data has become to businesses and the need for technology like Snowflake's to manage it. They say it gives Snowflake's business validation from both the tech community and investor community. For Salesforce specifically, it also lays the foundation for a stronger partnership with Snowflake down the line.
The importance of data
The hype around Snowflake's IPO comes in part because of the fast-growing market for helping companies manage and analyze their data. Salesforce itself recently made a big bet on that market with its $15.7 billion purchase of Tableau.
"As companies are trying to streamline massive volumes of data, across many different sources and platforms and tools and technology and make all that data usable, Snowflake's technology is becoming increasingly important," said Futurum Research analyst Dan Newman.
So for Salesforce and Berkshire Hathaway, it's a way to get in relatively early on a company that's widely anticipated to build a strong position for itself in that market. Snowflake also has partnerships with Amazon Web Services and Microsoft Azure, the two largest cloud providers, meaning that its avenues for growth are strong.
"With the large addressable market opportunity as companies continue to move costly, rigid, and proprietary data warehouses to the cloud, there's still a lot of growth opportunity for Snowflake," said Rebecca Wettemann, an analyst at Valoir.
Berkshire Hathaway's involvement, and that of its famous CEO Warren Buffett, can be taken as an important seal of approval from the investment community ahead of the official IPO, Newman added. It's rare for Warren Buffett to invest in tech companies, which makes it even more significant, as Market's Insider's Theron Mohame notes.
A 'complementary' investment for Salesforce
For Salesforce in particular, Snowflake is very "complementary" to its own customer relationship management software, Newman said.
The investment could "benefit the company as its users turn to Snowflake to warehouse data, to integrate, streamline, and use as part of their Salesforce platform," he added. Its investment is also an overall validation from the tech community in Snowflake's business.
Salesforce likely has a strong self-interest in investing in Snowflake to build on its existing partnership, analysts told Business Insider.
"Salesforce in particular would have a vested interest in creating an integrated offering with Snowflake," Nucleus Research analyst Dan Elman said. "Customers themselves have been moving to use Snowflake more and more. So partnering with that brand kind of shows that they're in tune with what's going on in the market and changing customer preferences."
Valoir's Wettemann points out that Salesforce has a track record of investing in companies that are complementary to Salesforce's own offerings. Sometimes, those investments set the stage for an acquisition down the line, as we've seen with companies like Vlocity and MuleSoft — both one-time Salesforce Ventures investments that were later bought entirely.
As of June, Snowflake already has some integrations with Tableau and other Salesforce applications, making it possible to analyze data across both platforms. Elman expects that partnership to grow given this new investment in the IPO.
Ultimately, however, Newman says that the investment says as much as the broader market as it does about any virtue of Snowflake and its technology: "People are very excited about both their specific product and service, but also the marketplace in which Snowflake is operating."