Domo, Slack and Tableau: How the disruptors are already facing disruption

Updated March 28 at 3:25 a.m. PST to include more recent Domo financials.

Being king of the hill in tech isn’t what it used to be. And the intertwined fates of three of this era’s hottest enterprise companies show just how rapidly fortunes can rise and fall. Or, at least be threatened.

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In this case, the three companies are Tableau Software, Slack, and Domo. Depending on how you frame their businesses, they may or may not be direct competitors. Though at the very least, their ambitions are bleeding into each other’s territories.

And the fact that they are not afraid to take on recently minted “incumbents” who have sizable head starts demonstrates just how tenuous a company’s grip on a given market can be these days. Unlike consumer services, such as Google and Facebook, where certain network effects make it difficult for users to switch to competing platforms, it seems these companies think each other’s customers are ripe for the picking and view their respective markets as wide open.

To understand this dynamic, let’s start with the company that made big headlines this week: Domo.

The Utah-based business intelligence company announced this week that it had raised $130 million at a $2 billion valuation. It has now raised a total of $590 million. The company hit an annual revenue run rate of $50 million in December 2014, according to the Wall Street Journal.

UPDATE: In an email, a Domo spokesperson said at some point in 2015 the company’s revenue hit an annual run rate of $100 million. 

Having spent several years in semi-stealth, Domo revealed its business intelligence dashboard that hoovers up all data inside a company and turns it into easy-to-read visualizations that can be sliced and diced in infinite ways.

This puts it in direct competition with Tableau Software, an enterprise data visualization company that went public back in 2013. And Domo’s timing probably couldn’t have been better.

In early February, Tableau, which offers both software and cloud versions of its products, reported earnings for Q4 2015. The revenue numbers seemed solid: The company reported $653 million in revenue for 2015, up from $412.6 in 2014.

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But the company projected total revenues for 2016 to be in the range of $830 million to $850 million. That was less than Wall Street expected, and investors immediately chopped Tableau’s stock price in half.

It was a cold slap to a company just three years off an IPO that was one of 2013’s hottest, rising 60 percent on the first day of trading. But as it’s a company that offers a hybrid of traditional and cloud products, investors are nervous that Tableau needs to shift more resources to the cloud side as it faces an increasingly crowded field of competitors.

That no doubt leaves Domo feeling like Tableau is plenty vulnerable. Its $2 billion post-money valuation puts it under Tableau’s $3.1 billion public market capitalization. But that gap has narrowed dramatically over the past year.

And Domo founder Josh James has said he’d like to take the company public this year if market conditions allow it. An IPO would likely send Domo’s valuation even higher.

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Of course, Domo isn’t content to stop with tackling one market leader. In its announcement this week, Domo announced it had created a $50 million investment fund for third-party app developers who could extend its platform. The investment partners are GGV Capital, Institutional Venture Partners, and Zetta Venture Partners.

This mirrors the strategy used by white-hot Slack, which started an $80 million fund last December. That alone might not be so worrisome to Slack, which is more focused on collaboration and communication inside enterprises. The two companies have seemed to be on different paths strategically, enough so that they even share three investors: Andreessen Horowitz, IVP, and SV Angel.

But then, Domo also announced this week the release of its own messaging and collaboration tool: Buzz. While it may not yet be the centerpiece of Domo’s business, it clearly puts the company in Slack’s territory.

Slack has been on its own blistering pace, raising $339 million with a reported valuation of $2.8 billion. Several reports have indicated that Slack is now looking to raise anywhere from $150 million to $300 million at a $5 billion valuation.

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Beyond the money needed to invest in the business, one can begin to see that these crazy financing rounds maybe be as much about making a statement. If you’re making purchasing decisions and you glance around at a bunch of companies that each are only a few years old, you start to wonder which one might be around for the long haul.

With a fresh horse trying to gallop up from behind, a $5 billion valuation for Slack could remind investors and customers who really has the wind at their back. And to the degree that they are competing for employees in a tight labor market, being able to talk about the bigger, brighter future is a critical edge.

And so the funding arms race is likely to intensify even amid talk of a broader funding slowdown. All three of the companies will have a big challenge ahead this year to continue to build real momentum, but to also maintain the clear perception that they have that momentum.

As the pace of these contests accelerates, it seems like it will only take one stumble to lose the race.

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