Google Cloud finance chief leaves to become CFO of Confluent as software start-up heads for public market

Key Points
  • Confluent said Monday that it's hired Steffan Tomlinson from Google's cloud division as its new CFO as the company moves toward the public market.
  • In April, Confluent raised money at a $4.5 billion valuation in a funding round led by Coatue Management.
  • Tomlinson joined Google in 2019 and was previously CFO at Palo Alto Networks, helping guide the security software vendor's IPO in 2012.

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Confluent CFO Steffan Tomlinson
Steffan Tomlinson

Two months after raising venture financing at a $4.5 billion valuation, software vendor Confluent is taking its next step toward the public markets. The company said Monday that it hired Steffan Tomlinson from Google's cloud division as its chief financial officer. 

Tomlinson has spent more than 25 years working in finance at tech companies, including taking Palo Alto Networks public in 2012, and guiding Aruba Networks through its 2007 IPO. He was hired by Alphabet CFO Ruth Porat to run finance at Google Cloud in April 2019.

Confluent, founded six years ago, is one of the many subscription software businesses that have powered through the Covid-19 crisis, proving its value as most of its customers' employees are working remotely. Companies including RBC, HomeAway and Bosch use Confluent's so-called event streaming software to pull together siloed data from various business units into a single pipeline so employees can make quick decisions and provide concise information to customers.

Tomlinson said he met Confluent CEO Jay Kreps last year. They reconnected in recent months, as Kreps was looking for a CFO to help take the business to the next stage. Tomlinson said it was the perfect time for him to make the move.

"What I look for in a company is the journey they're on," Tomlinson said in an interview. "Clearly, Confluent is a late-stage, privately held company. We look at an IPO as one step along the journey of creating value and having a durable growth model."

Trading Nation: Cloud stocks take off

With publicly traded cloud software companies like Zoom, Twilio and Okta soaring in value and many venture-backed software start-ups seeing continued growth, a number of companies are looking to potentially go public this year, despite the economic crisis caused by the coronavirus pandemic. Snowflake and Asana have both confidentially filed paperwork for the market debuts.

Confluent is more likely to hit the public market in 2021, in part to give Tomlinson enough time to grasp the business and prepare the story for investors, according to people familiar with the matter, who asked not to be named because the plans are private. Kreps said that no timeline for an IPO has been set.

The company, based a few miles from Google's headquarters in Mountain View, California, built its technology using the Apache Kafka open-source platform, which Kreps helped develop in his previous role at LinkedIn.

Confluent hasn't disclosed financial figures, but said annual recurring revenue almost doubled in 2019, and its employee base topped 1,000, across 20 offices worldwide. Confluent lets customers run the technology in their own data centers or in the cloud through partnerships with Amazon, Microsoft and Google.

The company said cloud revenue surged more than 450% last year, and Kreps said there's no sign of it slowing. 

"It's the fastest-growing part of the business by a lot," Kreps said. When the coronavirus hit, "we were unsure whether migration to cloud would speed up or slow down for us," he said.

The open-source business model, which allows companies to build and commercialize proprietary technology on top of free software, has spawned a number of successful public companies in recent years, including Elastic and MuleSoft, which Salesforce purchased for $6.5 billion in 2018.

In addition to the Tomlinson announcement, Confluent said MuleSoft ex-CEO Greg Schott, who left Salesforce this year, is joining the board. Meanwhile, Cheryl Dalrymple, who had been Confluent's CFO, is staying on as chief people officer and head of corporate development.

A direct listing candidate?

Confluent is clearly marching toward the public market, but how it gets there has yet to be determined. Venture firm Benchmark is one of the company's biggest backers. Bill Gurley, a partner at Benchmark, has become a vocal critic of the traditional IPO, arguing that it hands over too much underpriced stock to bankers and new investors.

Gurley has been encouraging companies to follow the lead of Spotify and Slack and pursue direct listings, giving existing investors the chance to sell stock to the public at a market clearing price.

Direct listing is a more 'elegant approach': Bill Gurley

Eric Vishria, the Benchmark partner who sits on Confluent's board, said the direct listing is definitely an approach that Confluent, and many others pursuing the public market, should consider.

"They all should be direct listing candidates," Vishria told CNBC. The company raised $250 million in April, in a round led by Coatue Management, alleviating the pressing need for cash as part of an IPO.

Kreps said that he and Tomlinson haven't even discussed yet whether an IPO or direct listing will be the preferred route.

"Intellectually, it makes a ton of sense," Kreps said, regarding a direct listing. "The track record is awfully short."

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Disclosure: Comcast Ventures, the venture arm of Comcast, is an investor in Slack. Comcast owns CNBC parent company NBCUniversal.