Ronald Hudson - Fotolia

ThoughtSpot sells $20 million equity stake to Snowflake

ThoughtSpot received a $20 million equity investment from a cloud data services provider in a move that helps validate the analytics vendor's strategic focus on the cloud.

ThoughtSpot received a $20 million equity investment from Snowflake, strengthening the existing close alliance between the two vendors and raising the possibility that the dominant cloud data services provider will acquire the analytics vendor.

The purchase, revealed March 9, was made through Snowflake Ventures, the venture arm of the cloud data services provider.

ThoughtSpot, an analytics vendor founded in 2012 and based in Sunnyvale, Calif., first partnered with Snowflake, founded in 2012 and based in San Mateo, Calif., in 2019.

That agreement enabled joint ThoughtSpot and Snowflake customers to run their analytics workloads directly in Snowflake's cloud data warehouse without having to extract data from storage and load it into ThoughtSpot for analysis. Snowflake subsequently integrated ThoughtSpot's platform into its Partner Connect Program, enabling Snowflake customers to try ThoughtSpot to see whether the BI platform is right for them.

In June 2020, ThoughtSpot was named Snowflake's technology partner of the year for innovation and achieved elite partner status, and in December 2020, Snowflake CEO Frank Slootman was the featured guest during the keynote address of Beyond.2020, ThoughtSpot's virtual user conference.

Whether the purchase of a small part of ThoughtSpot, which previously raised $543.7 million in seven funding rounds and was valued at $1.95 billion at the time of its Series E round in August 2019, is a precursor to an acquisition, however, remains to be seen.

Neither Snowflake nor ThoughtSpot denied the possibility.

A spokesperson for Snowflake replied, "No comment."

Sudheesh Nair, CEO of ThoughtSpot, meanwhile, said both ThoughtSpot and Snowflake will do whatever is best for their customers.

"It's the 'Are you dating to get married' question," he said. "Frank Slootman and Mike Scarpelli, their CFO, are always focused on what is right for their customers, and they always do what is right for their company. My thinking is pretty similar, whether [something] is right for our customers."

A sample dashboard from ThoughtSpot displays an organization's sales data.
An organization's sales data is displayed on a sample dashboard from ThoughtSpot.

Currently, however, Nair said he is not focused on a possible purchase by Snowflake.

"I cannot afford to think of an acquisition," he said. "I think about building a company of lasting value. The technology product that we have is phenomenal, the talent we have assembled is second to none, and we have cash in the bank, so my goal is to keep focusing on executing and building this company to be as big as it can be. But having said that, I won't take anything off the table."

Beyond the equity investment and previously existing partnership, Snowflake and ThoughtSpot are a good technological match, according to Boris Evelson, a principal analyst at Forrester Research. Just as Google lacked BI capabilities before acquiring Looker in June 2019 for $2.6 billion, Snowflake lacks an advanced analytics platform.

The vendor debuted Snowsight in 2020, but the platform has limited capabilities. ThoughtSpot, on the other hand, was built with augmented intelligence and machine learning capabilities from the start and quickly established itself as competitive with platforms such as Power BI, Tableau and Qlik.

In addition, after initially developing its platform with on-premises customers as the primary target audience, ThoughtSpot revamped its platform over the past year to make it cloud-first with a SaaS offering. That move not only modernized its capabilities to align with the direction of the market but also aligned it with Snowflake's cloud-first capabilities.

I can never speculate on an acquisition, but hypothetically it makes sense. Such an acquisition would be similar in terms of complementary products -- data lake/data warehouse and BI platform -- to Google acquiring Looker a couple of years ago.
Boris EvelsonPrincipal analyst, Forrester Research

"I can never speculate on an acquisition, but hypothetically it makes sense," Evelson said. "Such an acquisition would be similar in terms of complementary products -- data lake/data warehouse and BI platform -- to Google acquiring Looker a couple of years ago."

While an acquisition might make sense given the complementary capabilities of ThoughtSpot and Snowflake, Dave Menninger, research director of data and analytics research at Ventana Research, cautioned that a $20 million equity investment is not unique and is not automatically a harbinger of bigger things to come.

"An acquisition is always a possibility, but I wouldn't jump to any conclusions," he said. "Venture groups take a portfolio approach and it's often more about establishing a tighter relationship with the partner than it is about foreshadowing an acquisition.

"It's not obvious that Snowflake would want to be on a specific analytics vendor at this point when it might jeopardize relationships with other vendors."

Beyond hinting at potentially bigger plans ahead, Snowflake's equity investment in ThoughtSpot will enable the analytics vendor to accelerate product innovation, increase its return on investment from cloud migrations and deepen its joint go-to-market strategy with Snowflake.

Nair stressed, however, that the cash comes with no obligations and ThoughtSpot is free to spend the money however it sees fit, and that it only adds to the vendor's cash reserves of about a quarter of a billion dollars.

"It's not like this is needle-moving from a dollar point of view," he said.

It is, however, validation that ThoughtSpot's shift from on premises to the cloud was the right move, Nair added.

"The challenge always is perception, so having validation like this from one of the largest players in the space is going to help us accelerate that perception transformation," he said.

Similarly, Menninger said Snowflake's investment in ThoughtSpot provides validation that the analytics vendor was correct in shifting its focus to the cloud.

"Snowflake is one of the 'darlings' of the cloud database market right now and everyone wants to be associated with them," he said. "For ThoughtSpot, it broadens their addressable market and it gives them some cloud credibility by being associated with one of the leaders. For Snowflake, it helps broaden their ecosystem and provides their customer base with a new approach to analytics."

While Snowflake now owns an equity stake in ThoughtSpot, ThoughtSpot remains multi-cloud. In February 2021, it formed an alliance with Microsoft Azure, and it has relationships with Google Cloud, AWS and Databricks.

Meanwhile, in the event that a Snowflake acquisition of ThoughtSpot is not on the horizon, ThoughtSpot continues to position itself for a potential initial public stock offering or another substantial private funding round by demonstrating success over time now that it has become a SaaS vendor. Its focus is on transforming its annual recurring revenue base to SaaS, ensuring net retention of revenue above 120% and achieving 40% to 60% overall revenue growth.

"Once those things are done, ThoughtSpot will have plenty of money and options," Nair said.

Next Steps

ThoughtSpot makes first acquisition, buys SeekWell

Acquisition by ThoughtSpot adds data integration capabilities

Dig Deeper on Business intelligence technology and platforms

SearchDataManagement
SearchAWS
SearchContentManagement
SearchOracle
SearchSAP
SearchSQLServer
Close