SaaS company Okta filed its S-1 IPO paperwork on March 13th 2017, marking another SaaS firm looking to go public this year. The company has yet to disclose how much it is looking to raise.

Following in the footsteps of MuleSoft, which started trading on March 14th under the ticker ‘MULE’, the company will look to go public and trade under the ticker ‘OKTA’. The IPO will be underwritten by Goldman Sachs, JP Morgan and Allen & Company.

The Positives

As seems to be the case with any software filing for IPO, the company, founded in 2009, is yet to turn a profit. However at the top level revenues are growing, with a 109% year on year increase between 2015 and 2016 seeing it close with $85.9 million fiscal last year. Net losses have not prevented successful IPOs in the past and the company has already successfully raised $228 million in funds and was valued at $1.2 billion in 2015.

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There is also the small matter of a growing B2B user base, with over 2 million people already using one of the company’s six products on a daily basis. As cloud-based technology continues to be adopted, more secure and better understood, this is likely to increase. In a nutshell, Okta provides Identity Access Management (IAM) to companies on a subscription basis, allowing individuals to access all SaaS applications with a single login. Given the premise is subscription-based and the company has a low churn rate, there is a clear continual revenue stream and certainly a high-growth potential.

Head in the clouds?

As we touched upon earlier, Okta is not yet making a profit. In fact, last year losses increased to $76.3 million from $59.1 million in 2015 and while that may not have stopped funding coming through to companies in similar situations, there are other potential pitfalls. An issue mentioned in the company’s Risk Factors section was that the company did not control the underlying systems it was responsible for logging in to, meaning they are liable to suffer if a company switches to a non-standard way of logging in.

Okta also operates in a very competitive space and counts established companies such as Microsoft as potential competition. There is also the fear that a future increase in competition could lead to reduced subscription prices and lower revenue per client.

In all, Okta clearly boasts an in demand product which is serving a very useful purpose and while the losses are worrying, they are not unusual. Keep your eyes peeled for disclosure on both the valuation the company is looking for at float and a potential IPO date.