This dog ain't cool enough to smoke pot

[Bloomberg] [Fully Charged]( From [Bloomberg](   [FOLLOW US [Facebook Share]]( [Twitter Share]( [SUBSCRIBE [Subscribe]](  Hi, everyone. It's [Shira](mailto:sovide@bloomberg.net). Many of us have been fixated on WeWork's [struggle to go public](, including [a WSJ report about the CEO's marijuana-infused trip on a private jet](. Then there's the [disastrous post-IPO stock performance]( of high-profile startups Uber Technologies Inc. and Lyft Inc. But as has often been true in the last few years, it pays to avert your gaze: The un-glamorous tech companies are running circles around their cool peers. The latest example is Datadog Inc., which helps companies monitor the health of their apps and computing infrastructure, and [sold its first batch of public stock late Wednesday](. If you fell asleep reading the description of Datadog, let me wake you up by saying that the company's most recent pre-IPO investors are up nearly 1,100%, according to figures from EquityZen, a marketplace for private stock sales. In a non-systematic look at a dozen other tech companies that have gone public in the last couple of years, the stock gain for Datadog's pre-IPO investors is at or near the top of the leader board. Repeatedly, the Zzzz startups that, like Datadog, sell cloud subscription software to businesses have been the ones that deliver the goods for early backers. There have been exceptions, but companies like Zoom Video Communications Inc. and Slack Technologies Inc. -- the coolest of the Zzzz crowd -- have tended to produce strong returns for pre-IPO investors, and typically [their public shares have done well, too](. Investors, both public and private, love these software-as-a-service companies. Generally their technology is better than anything that came before -- if there was an old-guard technology with similar functions -- and once businesses use the software and stitch it together with email, calendars, information databases and other corporate systems, it can be tough to ditch. If they're managed properly, [these business software companies can grow fast and predictably](. Among the tech companies that have debuted on U.S. stock exchanges since the beginning of 2018, nine of the top 10 by stock gains from their IPO price are software companies that sell to businesses, according to data compiled by Bloomberg. (Number one is Zscaler Inc., whose share price has more than tripled since its March 2018 IPO, despite [a recent drop](bbg://news/stories/PXOI0U6JIJUO).) What are the lessons here? Well, not surprisingly, it may be that the consumer-oriented tech companies with lots of attention as startups may be great companies but not necessarily great investments if the hype leads to overvaluation. The other lesson may be that you're in luck if you founded a company in a sector like business software that, at least for now, is the apple of investors' eyes. I have my doubts about how long these software-as-a-service companies can stay cool, or viable. When or if there is an economic downturn and companies have a hard look at what they're spending on technology, there are going to be some software bills they can do without. The business software firms are also richly valued, which makes them prone to stock swings, and some are [spending big to grow]( in a way that may not be sustainable. Still, Datadog shows the benefit of being the right kind of business at the right time. Bloomberg News reported that Cisco Systems Inc. approached Datadog recently [with a takeover offer]( significantly higher than the $7 billion valuation it had been shooting for in an IPO. Datadog was apparently confident enough in its prospects to turn that down and opt to go public. The uncool companies really are that cool. --[Shira Ovide](  Here’s what you need to know in global technology news: Facebook Inc. is expanding its Portal line of video-chat devices, including a new one that connects to televisions. The company also said it will resume having people [review select audio clips]( from Portal devices, a practice Facebook paused after a recent backlash to the practice in the industry.  Mr. Zuckerberg is [going to Washington](, and it probably won't be fun. The Facebook chief executive officer is meeting with policy makers as they scrutinize the company over consumer privacy, harmful posts on its internet hangouts and its power over internet advertising.  As streaming companies fight over top entertainment professionals, Netflix Inc. is [dangling bonuses]( at film makers, actors and producers if their movies do well.  Here's that WSJ story about the [profound eccentricity]( of WeWork's co-founder and CEO, Adam Neumann.   Sponsored Content by Lacework Lacework closes $42 million in funding to drive the new generation of security. This new generation of security must be purpose-built to secure today’s modern infrastructure and bridge Security & DevOps Teams. [Learn how you can enable your Cloud Security & DevOps Teams like never before.](   You received this message because you are subscribed to the Bloomberg Technology newsletter Fully Charged. 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