The Internet ‘Plumbers’ Who Built a $5.6 Billion Company

By Kenrick Cai

On a sunny day in August 2021, George Fraser was trying to relax at his family’s lakeside cottage in the woods of Wisconsin. But the CEO and co-founder of Fivetran couldn’t get his mind off the job and the company he spent nine years building with his childhood friend Taylor Brown, whom he met during their joint vacation in the woods. Wisconsin.

The two of them had come up with a clever idea: Help companies collect data from all kinds of sources—Twitter posts, credit card transactions—and then charge them to feed that big data to analytics companies like Snowflake or Databricks, which could, ideally, reveal to them what this data “hides.” Fraser and Brown had previously been through the Y Combinator accelerator. They raised about $160 million in funding and spent endless hours tinkering with the technical data. .But they still didn’t have a product designed to serve large companies.

“For years it was the main problem we had to solve,” Fraser recalls now. “It was a long journey.”

One of Fivetran’s board members was Bob Muglia, who had been Snowflake’s CEO. Muglia had more experience with what was at stake. He recalls that then-Microsoft chairman Steve Ballmer “turned on me” when he lost enterprise customers to Oracle. (In 2011, Satya Nadella, Microsoft’s current CEO, replaced Muglia.) Before that, Muglia spent five years building Snowflake, but was shown the exit door just a year and a half before the company launched one of the largest initial public offerings in Silicon Valley history. This time, he was warning Fraser that time was running out. Muglia had said at the time. “I told them: Hell, there’s no product.”

Sitting behind a desk that belonged to his great-grandfather, who had been president of the title company Chicago Title and Trust since the 1930s, Fraser decided to pursue a drastic, traditional, solution to his problems. He would buy the “ticket” to his company’s viability. HVR, a rival company from San Francisco, based directly across the street from Fivetran’s Oakland headquarters, had taken several business deals out of their hands. But Fraser had heard on the market that HVR was for sale for $700m – but to buy it he would have to bid before the end of the week he was starting.

The deal would give them firstly business income and secondly a product that they could then perfect. The problem was that Fivetran, then worth no more than $1.2 billion, did not have the required liquidity. Still, Fraser had plenty of admirers in Silicon Valley—and a huge reserve of raw tenacity.

“Most, after several years of going in the wrong direction, will eventually close their companies completely and go elsewhere,” says Y Combinator president Geoff Ralston, who counts Fivetran among the few “cockroaches” who have managed to survive among the 3,800 startups that have passed through Y Combinator in total. “What made these guys different was that they never believed they had reached a dead end,” he says.

On Saturday, however, Fraser approached five leading tech investment firms, including Iconiq Capital of San Francisco and D1 Capital Partners of New York, saying he needed $565 million in capital to finance the deal. . Within 72 hours, everyone had agreed to give the money. “It was an ace up our sleeve,” says Fraser. “It was a leap for the company.”

The transaction boosted Fivetran’s valuation to $5.6 billion, but the big prize was HVR’s nearly $30 million in revenue from majors, which gave Fivetran a stronger “base” than most competitors had Many of those companies, such as direct competitor Airbyt (which was valued last year at $1.5 billion despite revenue of less than $1 million), are said to be looking at ways to save money today. “We don’t have that problem. , as our multipliers are not as crazy, while our revenue has grown significantly,” says Fraser.

The company, which is ranked No. 27 on this year’s Forbes Cloud 100 list), expects revenue of $189 million in the current fiscal year (which ends in January), more than double last year. In addition, it has strengthened its clientele with companies such as JetBlue, Forever 21 and fast food chain Nando’s. Forbes estimates that the two co-founders each own 1/10 of the company, which means they’re each worth about $500 million (since Forbes values ​​their value with a 10% discount like it does for private companies companies). Martin Casado, a partner at venture capital firm Andreessen Horowitz, who led Fivetran’s last three funding rounds, says the company’s lead in the field of “data pipelines” is “undeniable.”

Her main advantage? Ease of use. “It’s the most simple, ‘brain-dead’ thing ever created on the planet,” Muglia says. But that simplicity hides the highly complex system behind it. At first the product streams data once a day, at midnight. And Fraser follows a peculiar ritual every day, waiting for the process to start so he can check the flows. If something goes wrong – and from the first moment “there were problems” – he tries within the next few hours to fix the problem, as plumbers do. “It’s very rare to find someone as brilliant as George working on such a common problem as this,” says Fivetran investor Casado. (Among his other accomplishments, Fraser has a Ph.D. in neurobiology from the University of Pittsburgh ).

And while Fivetran’s coffers — which still have about $200 million in cash — may look full enough to see the company through a venture capital “winter,” Fraser says he plans to move on to a new round of financing within the next two years, regardless of market conditions; then he plans to take Fivetran public. Failure is not an option, after all — in part because of the pressures on the company’s two co-founders from the small Wisconsin community where they their holidays.

“You hear all the time about what everybody’s doing, and there’s all kinds of rumors,” Fraser says. “The unexpected consequence of starting this company is that all these people have heard about it. So we really have to make her succeed, otherwise we can’t stand it,” he explains.