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📮The Sunday Newsletter archive

An IoT Leader

“Metaverse” may be investors’ favorite buzzword right now, but Samsara wants to change that. The tech startup has chosen “IOT” — Internet of Things — as its ticker to create buzz, obviously. The company was founded in 2015 by two already successful entrepreneurs who had sold their previous startup, Meraki, to Sisco ($CSCO) for $1.2 billion.

Samsara aims to modernize and digitize the sectors that depend on physical operations 🚚. Businesses in industries like transportation, logistics, wholesale and retail trade have been historically underserved by technology; there’s still a lot of pen and paper. Yet Samsara has built a modern solution for them; it’s called the Connected Operations Cloud. 

The company captures data from sensors and cameras and uses AI to bring visibility and analytics to previously opaque operations and disconnected systems. Customers can use the Connected Operations Cloud to visualize their physical operations in real-time and increase their efficiency. 

They can reduce fuel usage or accidents, which are part of operations in large logistics firms. For example, the company mentions in its prospectus that a local government that uses its technology has reduced fuel usage by 19%.

Because its customers are very practical, such improvements in efficiency attract more and more companies helping Samsara grow exponentially. While it was founded just in 2015, its revenue topped $302.6 million in the first nine months of the year, up 74% y/y. And at the same time, its operating leverage has been impressive. This year, its operating margin improved to -34%, from -84% in 2020 and -190% in 2019.


📫Originally posted as part of the Sunday Latte
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Commentary

Samsara is a first mover in the industrial IoT space 🤖. It doesn’t just collect data from sensors and cameras but it uses AI to analyze those data and turn them into actionable insights. It’s quite disruptive as companies with physical operations used to rely mainly on estimates instead of advanced real-time reports. As of October 30, it had over 13,000 core customers who are customers with annual recurring revenue (ARR) of $5,000 or higher.

The company plans to raise about $750 million at an average price of $21.5 per share. At this price, its market value will stand at $10.7 billion and its P/S ratio at 28.4. It’s definitely an expensive multiple but is justified given the company’s strong top and bottom-line performance as well as its promising future potential. Shares start trading on Wednesday. 

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