In June, Tom Siebel predicted another recession, this one triggered by the spread of Covid-19. Now as his software business C3.ai goes public on the New York Stock Exchange, the billionaire entrepreneur is glad he was wrong.
C3.ai priced at $42 on Tuesday night, selling 15.5 million shares and raising $651 million in new funding. Shares of C3.ai soared more than 140% in the company’s initial minutes trading on Wednesday, implying a market cap, at least temporarily, approaching $10 billion.
Siebel, a former Oracle veteran who sold his previous business, Siebel Systems, back to Oracle for nearly $6 billion 15 years ago, founded C3.ai in 2009. The enterprise software provider reported revenue of $157 million for its fiscal year which ended on April 30, up 71% year-to-year, according to the company’s S-1 regulatory filing. To date, the company is not profitable, registering a net loss of $69 million for that period, up from $33 million the year before.
Siebel — who famously suffered a devastating injury from an elephant just months after launching C3.ai — is known for his brash words and aggressive marketing. C3.ai was originally billed as C3 Energy, leaning into the sector that provided key customers for its cloud, data analytics and machine learning tools. In 2016, Siebel renamed the business C3 IoT, declaring the company was more of an end-to-end software platform for building and managing IoT projects and infrastructure. “I couldn’t let this thing diminish,” he told Forbes in a 2017 profile. Sometime between the company’s appearances on the Forbes Cloud 100 lists in 2018 and 2019, Siebel renamed C3 again to C3.ai. This time, there was no press release; C3.ai went back and changed the name in past announcements, leaving its full lineage (and the intentions they signaled) somewhat murky.
Today, C3.ai claims to offer artificial intelligence tools for industrial applications, still helping to predict maintenance issues, detect fraud and analyze large amounts of sensor data, but this time infused throughout with AI capabilities. “I was spending the first 20 minutes of every customer presentation explaining that, well, we’re really not an IoT company. Because when people think of IoT, they think about devices, and they think about hardware,” Siebel says. “And I explained, yes, we connect to devices, but we’re not an IoT company. We’re a software company. And what people are doing with all these data that we’re aggregating is predictive analytics, which is AI.”
C3.ai going public reflects a bounce-back in its business since the spread of the coronavirus, Siebel says, one that exceeded his expectations. In March and April, C3.ai was preparing for the worst, he says now, bracing for a major loss of business from its mostly large-sized customer base and considering large-scale layoffs. Siebel and C3.ai took more than $5 million in PPP loans while providing its data sets on the coronavirus to researchers. In June, Siebel set deferred expectations with Business Insider: “When the economy comes out of this, which I would hope would be, you know, ’21 or ’22, I think this is going to be a really powerful company. That’s when I would like to take this company public.”
Those layoffs didn’t happen, and Siebel says his company paid back the loan when it became clear that capital markets would still be available. He’d take the PPP loan again, he says. “It was a good program,” he says. “But for that PPP program, we would have done layoffs. We would have stopped firing [on all cylinders] and it would have been a big mistake.”
Instead, Siebel says the proliferation of distance and remote work in response to Covid-19 accelerated demand for his software tools, leading the company to seek additional financing for hiring and bolstering its services. The company considered a range of options, including private fundraising and special-purpose acquisition companies, or SPACs, before settling on a more traditional IPO.
“I think the traditional, old-school IPO process was probably the most tried, tested, proven, known to be high quality over the long-term … to be able to grow and finance our business to meet dramatically increased demand,” Siebel explains. As for his earlier comments that 2020 would be too soon: “It looked like the end of the world,” Siebel says now. “I was wrong.”
As other Silicon Valley companies like Airbnb and DoorDash join a herd of unicorns to go public in what could prove the biggest December for IPOs ever, Siebel’s company’s IPO is relatively modest. Its implied valuation at pricing of about $4 billion isn’t much more than its last private equity raise of $50 million at a $3.3 billion valuation in September 2019, per data from startup tracker PitchBook. That modest uptick can likely be explained by the company’s recent revenue growth in 2020, which appears more modest than its most recent fiscal year growth; C3 also depends on just three customers for more than 40% of its revenue, per its S-1.
But while C3.ai’s IPO may be somewhat overshadowed by the consumer giants’ offerings in the moment, history suggests it’s dangerous to bet against Siebel in the long run. And with shares trading at massive highs in the company’s initial minutes of trading, it appears Siebel’s bet on public investor demand was right. (Should that surge hold, expect decriers of IPO pricing inefficiencies to seize on C3.ai as a new example.)
“I think this IPO is a punctuation point as we try to build one of the world’s leading software companies,” Siebel says. “This AI is a powerful tool for good. And to be at the vanguard of that is just a remarkable professional privilege.”
At age 68, the billionaire says he has no plans to step back from C3.ai in the public offering’s wake, either: “I am doing this because this is my idea of a good time.”