Jeff Tangney, CEO of Doximity on the New York Stock Exchange for their IPO, June 24, 2021.
Each year, technology investment company Index Ventures sends a survey to about 400 companies from its portfolio to determine which technologies are getting the most attraction. About six years ago, it was called an open source product Apache Kafka appeared as the next big thing.
“It was clear this thing was on fire,” said Mike Volpi, a partner at Index Ventures, who has made other big bets in open source software, supporting Hortonworks in 2011 and Elastic in 2013
To find out who is behind the technology, Volpi turned to LinkedIn. There, he discovered that the creators actually came from LinkedIn, where they internally developed Kafka before launching a separate technology commercialization company.
That company – Slivno – held his own debut on the stock exchange on Thursday after raising over $ 800 million in an IPO. Confluent is now estimated at $ 11.4 billion, and Index is one of the main users.
It was a big day for Silicon Valley companies, thanks to Confluent’s IPO on Nasdaq, along with a healthcare company Proximity opening on the New York Stock Exchange. Between the two IPOs, four companies recorded $ 1 billion in profits.
Index is the second largest outside investor in Confluent, with a stake estimated at over $ 1.3 billion. Benchmark, which together led Confluent’s first investment in 2014, controls shares worth close to $ 1.6 billion.
Doximity, a professional network for doctors, is largely under radar because the company has not collected money from investments since 2014. Emergence Capital led the first round and continued to invest, gaining a 15% stake at the time of the IPO that is worth $ 1.3 billion at the end of Thursday’s close. InterWest, which joined Emergeng as the initial leader, owns shares valued at over $ 1.1 billion.
Sequoia’s longtime VC winner this time arrived for just $ 1 billion – his stake in Confluent is worth $ 963 million. Morgenthaler also came close, with a stake in Doximity worth $ 905 million.
A warm introduction
In every great outcome of an endeavor there is generally some combination of luck, time and rolodex. For the earliest investors, there is also a willingness to bet on companies that do not yet have a job.
Index not only has its annual survey thanking the $ 1 billion profit in Confluent, but also a friendly introduction by then-LinkedIn CEO Jeff Weiner.
Volpi said he contacted LinkedIn co-founder Reid Hoffman and Weiner to see if they could link him to Jay Kreps, who was the CEO of Confluent and one of the three co-founders. At LinkedIn, Kreps was the technical leader for infrastructure and storage systems, as well as the co-creator of Kafka, which adopted all the companies.
“Jay was a very visible person on LinkedIn,” Volpi said. “Everyone knew him personally.”
Companies have increasingly relied on Kafka to bring together all the happenings in their business, whether it’s a sale, a new order, or a product update, so they can understand big data flows.
Following the introduction from Weiner, Volpi met with Kreps and encouraged him to consider investing from Index because of his firm’s history in helping open source companies from a fairly early stage. Volpi said that the company had about 15 employees at that time and that it had no income.
Index led Confluent’s Series B is worth $ 24 million funding in July 2015, eight months after Benchmark led Serie A with $ 6.9 million. The post-money valuation was $ 149 million, according to PitchBook, and the share price was 96 cents. The starting price of the benchmark was 20 cents at an estimated $ 24 million.
The stock closed at $ 45.02 on Thursday, up 25% from its IPO price.
In the decade since Kafka was developed, the technology has been used by about 70% of Fortune 500 companies, according to Confluent, which counts Expedia,, Citigroup,, Man i Lowe’s as customers. While Amazon,, Microsoft i Google offering Kafka’s project management services, Confluent is the only company to have packed it all into a commercial offering that extends across all major clouds and physical data centers.
After a day on the market, Confluent is almost as valuable as Elastic, Volpi’s latest open source IPO. Elastic, which entered the market in 2018, has a market capitalization of 13 billion dollars.
Before Elastic it existed Hortonworks IPO in 2014. That one didn’t go so well. Hortonworks was one of several companies trying to commercialize Hadoop. His main rival, Cloudera, was larger, but they both burned cash and were late in the cloud.
They’re done merger in 2019, i agreed to sell earlier this month to private equity firms in a $ 5.3 billion contract.
“Every time you get better at understanding mechanics,” Volpi said. “The Confluent cloud was launched and perfected much earlier in the company’s life cycle.”
Gambling before income
The phenomenon generates a return of a similar magnitude from investing in Doximity. But the road to get there looked completely different.
Known for early bookmakers on cloud software companies even earlier Salesforce and has been expanding recently on Veeva,, Zoom i Bill.com, Emergence is primarily looking for subscribers with early appeal and some satisfied paying customers.
Doximity had no paying customers. It was a network that at the time had several hundred doctors sharing insights with each other. Jeff Tangney, who previously helped launch healthcare company Epocrates, was a co-founder and CEO.
Kevin Spain worked at Emergengo for several years, but was not yet a partner. He was on the board of Veeva, which sells software to drug manufacturers, and learned about Doximity from a friend who was a doctor. He arranged a meeting with Tangney and was immediately intrigued by his mission to improve the technology doctors use to communicate and collaborate.
Spain expected a challenge to persuade Emergence partners to come to an agreement.
“The business model was a bit in the air, and the fact that it was revenue before us was far away,” Spain said. “I knew this was going to be a bit of a tough battle. I asked people a lot older than me to bet on this. It was definitely a shift in faith.”
Emergence together led Doximity’s $ 10.8 million Serie A in 2011together with InterWest, on an estimate after $ 36.9 million in money. Participated in the next two rounds also. Emergence and InterWest began investing at a price of 39 cents.
Shares more than doubled on Thursday to $ 53.
The Doximity network is now used by 1.8 million medical professionals in the United States, including over 80% of physicians. The company makes money by enabling drug manufacturers to promote drugs and treatments to a targeted customer base and giving recruits a centralized place to find job prospects. Doximity also recently launched a paid telehealth product.
Arrival jumped 77% in the last fiscal year to $ 206.9 million. And unlike most technology companies in the IPO phase, Doximity is profitable, generating $ 50.2 million in net revenue for the year.
Spain said that by becoming a standard place for doctors to connect with colleagues, share research and learn about new treatments, Doximity should not have spent money on marketing. His budget for advertising last fiscal year was $ 2.6 million.
“So many social networks have to spend a lot to acquire new users,” said Spain. “They never had to do that.”
WATCH: The IPO market is set strong for the second half of 2021