C3 is led by Tom Siebel, one of the sharpest founders in this space.
His resume includes:
- Helping Oracle reach $1B in revenues
- Starting Siebel Systems which did $2B in revs in 6 years
Here's Siebel's reasons for starting C3 (hint, not about $) 2/ Culture Matters
C3 has one of the best Glassdoor ratings/reviews I've seen:
- 89% approve of CEO
- 92% would recommend co. to friends
- 4.6/5 stars w/ 338 reviews
Employees rave about three things:
- Meaningful work
- Tough challenges
- Great incentives (paid learning)
3/ The Bull Thesis From a C3 Employee
I can’t write a C3 thread without mentioning this review from a current employee.
It’s one of the best bull pitches I’ve seen for the company.
When your employees know the thesis, you got something!
TL;DR: Make sure you provide value!
4/ Compensation & Skin In The Game
Siebel took a $5,700 salary in 2020 w/ $10M in options awards
He owns 38% of C3 and controls 78% of the voting power.
Together, management owns ~70% of the company.
Interests are aligned.
5/ C3’s Products: AI Suite Platform
C3 AI Suite is the only end-t2-end Platform (PaaS) designed to develop, test, and deploy enterprise AI applications at scale.
The Suite allows developers to create and customize their own applications using C3’s conceptual models.
6/ C3’s AI Apps
C3 develops specific apps for its AI Suite Platform (like apps on an app store).
These apps are both cross-industry and industry-specific.
Customers use C3’s applications to develop and launch AI-based models and tests.
Think of apps as pre-built AI models.
7/ How C3 Makes Money
C3 charges a subscription fee for their platform and a monthly usage fee for run-time on apps/cloud storage (per CPU-hour consumption).
87% of their revs are recurring/contractual and average 3yrs per contract
14% of their revenue comes from pro. service
8/ How C3 Differentiates
There’s two major advantages using C3 vs. alternatives:
- Operability on any cloud platform on/off premise
- Massive time/money savings
In one example, C3 saved over $400K and wrote 15K< lines of code than competitor …
9/ C3’s Go-To-Market Strategy
C3’s go-to-market strategy is simple:
- Make best and biggest companies your customer
- Do great work
- Use them as an example to gain market share down the funnel
This helps C3 naturally bleed to lower-end markets + validates their product
10/ Land & Expand Revenue Model
C3 customers spend 3x their initial contract value after joining.
That’s a great sign.
It means customers see the value and increase how much they use it in their org.
This translates to higher recurring revenues and strong cash-generation.
11/ Decreasing Sales Cycles
Another engine in C3s rev growth is their decreased sales cycle:
- 13 months in 2017 to 4.8 months in 2020
This makes sense as more companies see the value in AI and are quick to adopt C3’s tech and C3 captures smaller markets
12/ Rapid Revenue Growth
C3’s grown revenues from $33M in ‘17 to $157M in ‘20.
The company’s growth plan includes:
- Capturing more SMB customers
- Adding new AI Suite applications/products
- increasing use-cases with existing customers
13/ How To Gauge C3’s Performance
The best way to think about C3s performance is through “Remaining Performance Obligations”, or RPOs.
RPO shows how much outstanding revenue C3 has to collect from deferred / non-cancelable contracts.
As of Oct. 2020 C3 had $267M in RPOs
14/ C3 Financials
C3 had -$70M Operating Income on $157M in revenues
This makes sense as they spent 60% of revs on sales & marketing. Then another 40% on R&D.
These % should decline over time, showing operating leverage.
They also have $114M in cash vs. $121M in liabilities on Balance Sheet.
15/ IPO Potential Pricing
（这个是IPO之前的tweet，所以这部分的价格还是当时的估计。上周五的价格是120USD，crazy！！！）
C3s offering 15.5M shares at $31-$34/share. That brings total shares to ~97.4M.
At $31-$34/share you’re looking at an estimated market cap of $3B – $3.3B and ~$2.9B EV ($109M net cash).
Or 19x sales … Welcome to 2020
But let's think 5-10 years out.
16/ What Does C3 Look Like In 2025?
The company’s grown revenues at a 94% CAGR since 2017.
If we assume the company grows revenue at a 50% CAGR for the next five years we get $1.4B in revenues by 2025.
Will it get there? Who knows.
17/ Thinking About Valuation
（Valuation 仁者见仁智者见智了）
At $1.4B that’s ~2.15x EV/Sales for the following:
- Fast-growing
- First-mover
- High switching cost business
- Led by one of the sharpest founders in the game.
Given some SaaS valuation, a 5-7x multiple on sales seems cheap. Yet thats $7-$10B
18/ Risks
There’s a few main risks:
- Execution risk from Siebel (voting power)
- Customer concentration (should reduce over time)
- No brand recognition (vs. AMZN or MSFT offerings)
- CIOs developing in-house versions of platform (more expensive/time consuming)
19/ Concluding Thoughts
C3 has everything we want in a high conviction bet:
- A+ Founder/CEO with ample skin in the game
- Fantastic culture
- Dedicated Employees
- High switching cost product
- Pick-and-shovel business for a massive digital transformation
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