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Shares of the Elastic enterprise software company exploded on the company's first trading day.
Shares of the company, priced at $ 36 the day before, closed Friday at $ 70, a phenomenal increase of 94%.
Elastic raised $ 252 million during its IPO, but the investor's huge interest on Friday meant that the company left a lot of money on the table by failing to give a higher price to its shares.
In an interview, Elastic's CEO, Shay Banon, was pleased with the decision to set the price of the initial public offering at $ 36, which he described as "fair" considering a market that he considers as "sparkling". He stated that "Elastic was where we did not really go public to raise money", but in order to be perceived by customers as a "mature" company that is no longer just a start -up.
The sudden rise in the share price of the company seems to have surprised Banon.
"I think how fast it went up, I think people believe in the future of the company," Banon said. "I can not control the market."
Elastic's IPO marks a major event for Banon, who began by developing the company's research technology while "trying to create a recipe app" for his wife who was chef at a London restaurant. The challenge turned out to be disheartening.
"How on earth are you implementing a search field in all these recipes?" He said.
Since then, Banon and Elastic have integrated research systems into the internal applications and technologies of several popular companies. When people slide left or right on the Tinder dating app, Elastic's search technology helps users find their true love.
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The elastic technology also powers the Uber carpool app, which allows drivers to be paired with passengers, said Banon. Uber is also using Elastic's technology to help it search and calibrate its internal data centers so that the application does not suddenly become offline, he added.
Like most tech companies that have recently gone public or plan to do so in the near future, Elastic is not profitable. The company lost $ 52.7 million on sales of $ 160 million for its 2018 fiscal year, according to regulatory filings, and lost an additional $ 52 million last year with revenue of $ 88 million .
The results show that Elastic's sales are growing rapidly while its losses remain stable, which shows an improvement in its business.
The company has the additional challenge of creating a profitable business based on open source technology, which developers can access for free. Elastic's search technology is based on open-source Lucene search technology, but it provides businesses with additional features such as security and support.
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The goal is to "make sure we have enough incentives to convert those free users into paying customers, and then build loyalty," Banon said.
Elastic's competitors include some of the world's largest technology companies, such as Amazon and its AWS cloud business, as well as Oracle's Endeca research product, the company said in its regulatory filing.
And although Elastic is a partner of Google and its cloud computing business, Google could still invest more in its Google custom search engine tool to turn it into a competing product. For now, Elastic is referring to Google's search product, which companies can add to their websites for search capabilities, simply as "an ad-based site search tool with limited user controls".
To compete with technology giants, Banon is confident that Elastic's connection with the Lucene search tool and the open source community will ensure customers continue to purchase Elastic proprietary software and support.
"It's a big gap," he said.
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