Weave Jumps in the IPO Pool

Don't look now, but another Utah-based technology company (aka, a Silicon Slopes-based firm) has decided it's time to Go Public.

Specifically, shortly before Wall Street shut down for the day this afternoon, Lehi, Utah-based Weave announced it has filed paperwork with the U.S. Securities and Exchange Commission of its intent to sell shares through an Initial Public Offering.

Although Weave describes itself as

“smartphone for small business,”

(and the company does sell digital, Voice-Over-Internet-Protocol (aka, VOIP) phones and VOIP software), make no mistake about it, Weave is clearly a SaaS-based "all-in-one customer communications and engagement software platform for small and medium-sized businesses."

{NOTE: For the uninitiated, SaaS is the acronym for Software-as-a-Service. Put simply, SaaS means online software you access digitally from your computer, smartphone or tablet.}

In plain English, Weave helps SMBs connect with, serve and support their consumers.

According to its Form S-1 filing with the U.S. Securities and Exchange Commission, Weave's platform is

"... currently used by over 130,000 monthly active users across a range of industries, spanning dentistry, optometry, veterinary, physical therapy, specialty medical services, audiology, plumbing, electrical, HVAC and other home services."

To be clear, those 130K users represent more than 20,000 actual businesses, which is not nothing.

And based upon a review of the company's Key Business Metrics section in its Form S-1 (p. 17), it appears that Weave's customer base is growing somewhere between 25-30% per year ... and that includes the Covid-19 overhang.

In other words, as a consumer-facing SaaS platform, Weave focuses on helping its SMB clients across four areas:

• Communicating (with,
• Attracting,
• Engaging (with), and
• Retaining

end-user consumers as customers.

Of the over 130,000 SMB employees currently using Weave, 57,000 use Weave services via mobile devices (aka, smartphones).

And during September 2021,

Weave processed an average of 1.6 million text messages and approximately 2 million calls per business day.

In fact, last month Weave SMB customers had over 13.5 million interactions with consumers via SMS messages, faxes, and phone calls to

• Schedule customer appointments, and
• View or request customer reviews.

How Big is Weave's Opportunity?

Based upon its research, Weave's Form S-1 suggests that its (Total) Available Market in the U.S. is roughly $11.1 billion annually (based upon SMBs in America with fewer than 500 employees).

So far, Weave believes it has achieved a 10% market penetration in the dental industry in the U.S.

By contrast, it feels its total combined penetration into the combined dental, optometry, veterinary, medical specialty services, and home services vertical markets is approximately 3%.

Additionally, the company has launched (and contemplates launching) new services to support its SMB customers in the years ahead.

For example, since launching Weave Payments in late 2019, Weave says it has "... processed over $755 million in payments to-date across (its) customer base ...."

Speaking of sales, for the 2020 calendar year (ended December 31), Weave generated sales of $79.9 million, up 75% from 2019 results of $45.7 million.

More importantly, Weave produced sales of $53.7 million during the first half of 2021. Such growth, if it holds true to prior year results, suggests the company may top $110 million in sales for all of 2021.

{BTW:  The $1.6 million noted above that Weave generated in the first half of 2021 represented 3% of company revenue for the six months of the year.}  

To be clear, Weave's Form S-1 shows that the company is still losing money (a $40.4 million loss for all of 2020 and a $23.4 million loss through the first half of 2021). But such losses are often expected in a SaaS-based company, especially as it is still growing revenue.

How Much? And When?

According to Crunchbase, Weave has raised a total of $168 million in venture capital and outside investments, the most recent being $70 million in a Series D round of funding in October 2019.

As is customary in most initial S-1 filings, Weave has used a placeholder amount of $100 million as the total it expects to raise in its IPO.

But the story of the Weave offering (led by underwriters Goldman Sachs, BofA Securities, and Citigroup), still has a lot of holes, such as

1. The number of shares Weave expects to sell in its IPO,
2. The offering price range of said shares, and/or
3. The overallotment of shares available for its underwriters (should they choose to act upon the opportunity to purchase such shares at a discount to the offering price).

So look for future amended versions of this Form S-1 in the days and weeks ahead.

Timing-wise, however, we are entering an interesting part of the calendar with both Thanksgiving and Hanukkah on the near horizon.

Given the following:

• Most IPOs are proceeded by a roadshow that often takes two weeks of pitching the values and valuation of a pending IPO to prospective brokers, dealers and investors, and
• The fact that Thanksgiving in the U.S. falls on Thursday, November 26 this year, and
• The fact that Hanukkah starts on Sunday, November 28 and ends on Monday, December 6,

I believe there are only two small windows for Weave to price its shares and Go Public before the end of 2021. Those two windows are

1. The full week before Thanksgiving (November 15-19), or
2. The eight business days from December 8 through December 17.

{NOTE: I don't suspect Weave's underwriters would recommend Going Public on December 7th because it's the anniversary date of when Pearl Harbor was attacked by the Japanese in 1941.}

So ... am I right? We won't know until the IPO goes effective.

But for now, it's my best guess.

In the meantime, good luck Team Weave. Should be a very interesting quarter for y'all.