Ukraine-founded ‘unicorn’ GitLab to go public in US

Tech company GitLab, founded in Ukraine, will soon go public on the U.S. stock exchange Nasdaq.

Founded by Ukrainian tech entrepreneur Dmytro Zaporozhets and the Dutch-born Sid Sijbrandij in 2014, GitLab develops online services that help tech specialists to work faster and more efficiently. GitLab automates the process of writing code, detects bugs, and connects specialists that work on different parts of the project — from development to operation (hence the name DevOps platform).

The initial public offering, IPO, has long been GitLab’s goal. “As a public company, GitLab would benefit from enhanced brand awareness, access to capital, shareholder liquidity, autonomy and transparency,” Sijbrandij said.

The company was supposed to become public in November last year but canceled its plans because of the COVID-19 pandemic. GitLab hasn’t disclosed the new IPO date. It hopes to attract $100 million from its shareholders, but this figure could change when GitLab determines its share price.

The company intends to list its stocks under the symbol “GTLB,” according to its prospectus published on Sept. 17. This document, required by the U.S. Securities and Exchange Commission, explains how the company operates and what it can offer to its investors.

Once the offering is complete, GitLab will become one of the world’s largest public companies that doesn’t have a central office — all its work is remote.

Financial results

Valued at $6 billion in January, GitLab is Ukraine’s top ‘unicorn.’ The company works with big-name clients like Nvidia, Siemens, Goldman Sachs, Zip Recruiter, Pearson and Radio France.

It offers many of its services for free, to encourage the use of DevOps platforms. Additional features for executives cost $19 to $99 per month. The total number of the company’s paying customers increased from nearly 11,440 in 2020 to over 15,350 as of July 31, 2021.

In the first half of 2021, GitLab generated $108 million in revenue — a 69% increase from $64 million it made during the same period last year. The company’s net loss, in turn, grew from $43.5 million in the first half of 2020 to $69 million in the first six months this year.

“While we have experienced significant growth in revenue in recent periods, we cannot assure you that we will achieve profitability in the future,” the company said in its prospectus.

GitLab expects that its expenses will keep growing as it continues to invest in its growth. The company pours money into expanding to international markets, the development of new products, and the legal and accounting expenses of being a public company.

The company has to improve its service to take on powerful competitors — GitHub, acquired by Microsoft for $7.5 billion in 2018 and Atlassian, which generated $1.6 billion in revenue in 2020.

“We expect to continue to face intense competition from current competitors, as well as from new entrants into the market,” GitLab wrote in the prospectus. “If we are unable to anticipate or react to these challenges, our competitive position would weaken.” 

Attractive business

In the last ten years, GitLab has attracted nearly $414 million of investment. It is backed by the U.S. Goldman Sachs, Iconiq Capital and Alkeon Capital.

In 2018, the company raised $100 million and became a ‘unicorn’ for the first time, becoming valued at $1.1 billion. In 2019, GitLab attracted $268 million and achieved a $2.7 billion valuation. 

GitLab estimates its market to be worth nearly $40 billion and is expected to grow to $54 billion in 2024. After the IPO, GitLab’s valuation could exceed $10 billion, according to experts’ estimates.

Among investors and the public, GitLab is known for its radical transparency: it published an 8,400-pages corporate handbook detailing its strategic goals and the exact formula for calculating its employees’ wages. This book helps GitLab’s 1,350 employees to work remotely in 65 countries.

Another benefit of GitLab is that it is an open-source platform, meaning that programmers around the world can improve it. At first, it was hard for GitLab to transit from an open-source project to a commercial company, bus it attracted many loyal customers on the way. 

“GitLab really made open-sourcing mainstream,” said Jason Corwin, CEO at the U.S. financial company Safely Finance. 

Distribution of power

GitLab co-founder and CEO Sijbrandij is the company’s largest stakeholder. He owns 18.9% of shares, while the U.S. fund Khosla Ventures, which invested $4 million in GitLab in 2015, owns 14%.

Zaporozhets owns less than 5% of shares, he told Forbes. In Ukraine, Zaporozhets is considered to be the richest techie. In early 2021, Forbes estimated his fortune at $450 million, making him 23d in the list of 100 richest Ukrainians.

Although Zaporozhets is the main brain behind GitLab, he likes to be “a good programmer,” rather than a CEO.  He came up with the idea of GitLab in 2011 just to make his work in an IT company called Sphere Software easier. 

At first, GitLab was just his hobby, but then Zaporozhets met Sijbrandij who suggested building a business out of it. Ten years later, they still occupy the same roles: the Ukrainian is in charge of the technical side of GitLab, while the Dutchman takes on the business side.

Although Ukrainians are proud to call GitLab its ‘unicorn,’ Zaporozhets thinks of the company as global. But he understands why it is important to the country to call GitLab “the Ukrainian startup.”

“Let’s be honest, Ukraine doesn’t have so many positive moments, so people tend to cherish the good things. For Ukraine, GitLab is something to be proud of,” he said in the interview with the Kyiv Post in 2018.