In private markets, information is hard to come by. For limited partners, venture capital funds and VC wonks, insights into upcoming liquidity events can signal the heating up of initial public offering (IPO) and M&A markets, validate (or rebut) a VC fund’s claim to have picked top winners and hint at the return potential for institutional VC allocations upon a fund’s expiration. In that light, Trusted Insight introduces The Liquidity Watch List for Q1 2017, to highlight five companies we believe have a high degree of likelihood to be acquired or pursue a public offering in the near future.
Two companies highlighted in the October 2016 edition of The Liquidity Watch List have already achieved exits with two other featured companies currently undergoing the IPO process. Appdynamics, which was about to IPO in January 2017, was snapped up by Cisco in a last-minute acquisition just 24 hours before its entrance to the public markets. Snap IPO’ed in March at $17 per share; it is currently up 28% with its current share price at $21.82 (as of 3/22/17). Both Cloudera and Okta recently filed their S-1 on March 9 and 13, respectively.
At the start of the year, the market for tech IPOs, which has been relatively frozen for much of 2016, has seen several successful launches. Following an influx of successful liquidity events from late 2016 to early 2017, it appears that liquidity season is upon us. Here are the top five private companies we believe are likely to see an exit by the end of 2017.
Spotify
Founded: 2006
Description: This Luxembourg-based company provides on-demand music streaming to more than 100 million active users (50 million paid subscribers). It is the current market leader for on-demand music streaming, with more than twice the number of paid subscribers as the next largest player, Apple Music.
Total Funding Raised: $2 billion
Latest Financing: $1 billion convertible debt round in March 2016
Notable Investors: Accel Partners, TPG, Goldman Sachs, Founders Fund, Fidelity Investments, Creandum
Expected Liquidity Event: IPO
Argument: A glaring signal that the company plans to go public are the punitive terms that exist on its convertible debt financing. After a year, for every six months Spotify does not IPO, the discount rate increases by 2.5%, and the interest rate increases by 1% (capped at 10%). The company has also recently appointed Barry McCarthy (previous CFO of Netflix) as its new CFO, which is a strong indicator that management intends to navigate public markets.
Dropbox
Founded: 2007
Description: This Silicon Valley-based company provides cloud storage and file synchronization services for both personal consumers and enterprise clients. As of December 2016, Dropbox has over 500 million users, with the software being used by eight million businesses worldwide.
Total Funding Raised: $1.1 billion
Latest Financing: Series C round at a $10.4 billion post-money valuation in January 2014
Notable Investors: Accel Partners, Benchmark, BlackRock, Glynn Capital Management, Goldman Sachs, Greylock Partners, GSV Ventures, Index Ventures, IVP, JP Morgan Chase, Morgan Stanley, QueenBridge Venture Partners, Salesforce Ventures, Sequoia Capital, SV Angel, T. Rowe Price and Y Combinator
Expected Liquidity Event: IPO
Argument: Dropbox is now over 10 years old and has matured into a company that certainly holds the size and value to enter the public markets. As of 2017, Dropbox CEO Drew Houston stated that Dropbox was en route for a $1 billion revenue run rate and was free-cash flow positive. To put this into perspective, Box (Dropbox’s closest public competitor) reported in Q4 2016 that it generated only $103 million in revenue. Dropbox’s improving financials certainly justify it going public, but its rapidly increasing user base implies that it will continue to thrive long after IPO. Dropbox user base grew from approximately 400 million in June 2015 to 500 million in March 2016, representing a 25% year-over-year growth. This is a significant feat considering how large the company already is. More impressively, it continues to grow quickly in the face of multiple competing product lines such as G Suite (Google), Workplace (Facebook), Windows/Office cloud offerings from Microsoft, Slack, Asana, Atlassian and Box, among others. Gartner predicted that there are 130 companies in just the electronic file storage and sync market alone.
DocuSign
Founded: 2003
Description: This San Francisco-based company provides electronic signature technology and digital transaction management services for contracts and signed documents. Its core offerings include authentication services, user identity management and workflow automation.
Total Funding Raised: $558 million
Latest Financing: Preferred equity financing on October 8, 2015 at a post-money valuation of $3.1 billion
Notable Investors: Bain Capital Ventures, Accel Partners, ClearBridge, Citi Ventures, Deutsche Telekom, Intel Capital, Dell Ventures, IT Venture, Microsoft, Wellington Management, ICONIQ Capital, Comcast Ventures, Fidelity Investments, GV, Ignition Venture Partners, Generation Investment Management, Bessemer Venture Partners and Kleiner Perkins Caufield & Byers
Expected Liquidity Event: IPO or Acquisition
Argument: DocuSign is set to pursue an IPO following the hiring of executives with public experience over the past few years. Chief Financial Officer Michael Sheridan was the CFO of FireEye during its IPO, and General Counsel Reggie Davis was general counsel of Zynga during its public debut. Both hires were made within the past two-and-a-half years.
DocuSign is equally ripe for acquisition. Larger companies that have workflow solutions, but not digital signature products are likely to make offers due to DocuSign’s product synergy with other document management offerings. Smaller startups in this sector that have been acquired in the past are DotLoop (to Zillow), Cartavi (to DocuSign), RightSignature (to Citrix Systems), Silanis Technology (to VASCO Data Security) and EchoSign (to Adobe).
Lyft
Founded: 2012
Description: This Silicon Valley-based company provides on-demand ride-sharing logistics for more than 100,000 registered users in more than 65 U.S. cities. It trails only Uber in terms of U.S. market share.
Total Funding Raised: $2 billion
Latest Financing: Series F round at a $5.5 billion post-money valuation in January 2016
Notable Investors: Andreessen Horowitz, Founders Fund, General Motors, Icahn Enterprises, Mayfield Fund, Alibaba, Didi Chuxing
Expected Liquidity Event: Acquisition
Argument: Lyft is likely to pursue a liquidity event due to the fact that it has sought an acquisition very recently. It hired Qatalyst (the famous bank for brokering high-profile technology deals) last year to help source a buyer. It is widely reported that the company held acquisition talks with General Motors, which ultimately broke down due to disagreements over price. Nonetheless, Lyft is an attractive acquisition target for a larger business seeking entry into the U.S. ride sharing market due to its relatively low price point (compared to Uber).
MongoDB
Founded: 2007
Description: MongoDB is a NoSQL database engine that generates revenue through licensing backup and automation software, security features and enterprise consulting and training.
Total Funding Raised: $312 million
Latest Financing: $80 million Series F preferred equity financing on January 9, 2015 at a post-money valuation of $1.8 billion
Notable Investors: Goldman Sachs Group, VSL Partners, BlackRock, EMC Ventures, Fidelity Investments, KG Investments, Salesforce Ventures, T. Rowe Price, In-Q-Tel, Intel Capital, New Enterprise Associates, Sequoia Capital, Flybridge Capital Partners, Union Square Ventures, Aeon Funds and Altimeter Capital Management
Expected Liquidity Event: IPO
Argument: MongoDB has been a unicorn since 2013, and its recent executive team replacements signal a potential move to the public market.
Last year, the company hired Michael Gordon as chief financial officer, Carlos Delatorre as chief revenue officer and Meagen Eisenberg as chief marketing officer. Previously Gordon was the CFO at Yodle, a marketing company where he filed paperwork for an IPO (the deal has since been postponed) and was also a managing director at Merrill Lynch where he spearheaded IPO and M&A deals. In addition, with the company’s last funding round taking place nearly two years ago, an IPO would provide a fresh source of capital to sustain its business expansion. With the 2017 public tech markets expected to be strong, MongoDB is likely to time a public debut by end of next year.
You can view Trusted Insight's full list of Liquidity Watch Lists here.
Important Disclosures
This blog is for informational and educational purposes only. Nothing in this blog constitutes investment, legal or tax advice. This blog is not intended to constitute any offer or solicitation to buy or sell securities. Offers of securities or investment advisory services may be made only pursuant to appropriate offering or other disclosure documents, and only after prospective investors have had the opportunity to discuss all matters concerning the prospective investment or engagement with their adviser and the issuers of the securities. In addition, neither TI Platform Fund I GP, LLC nor any of its affiliated entities (collectively, “Trusted Insight”) may offer interests in any of its unregistered funds or accept subscriptions from any potential investors with whom it has no prior or existing relationship until the expiration of a 30-day “cooling off” period with each potential investor, respectively.
This blog is not an offer to sell, or solicitation of offers to buy, securities. Investments in a private fund can be made only pursuant to such fund’s subscription documents and private placement memorandum and only after careful consideration of the risk factors set forth therein. Non private fund investment advice shall be provided in accordance with the investment management agreement. Investments entail significant risks and are suitable only for certain investors as part of an overall diversified investment strategy and only for investors able to withstand a total loss of investment. Investment advice offered by Trusted Insight is typically available only to investors who meet statutory qualifications as promulgated under the Investment Advisers Act of 1940 and the Securities Act. In addition, there can be no assurance that current investments will be realized as projected. Actual realized returns will depend on, among other factors, future operating results, the value of assets and market conditions at the time of disposition, any related transaction costs, and the timing and manner of sale, all of which may differ from the assumptions on which the information contained herein is based. It should not be assumed that any issuers described herein were or will be profitable. Forward-looking statements involve known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples and should bear in mind that past performance is not necessarily indicative of future results. Neither Trusted Insight nor any of its affiliates or principals nor any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date that they were originally made. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
Information included herein does not constitute investment advice and should not be viewed as a current or past recommendation to buy or sell any securities or to adopt any investment strategy.
This blog is not to be distributed or disseminated without the prior written consent of Trusted Insight. This blog and any of the content therein is the sole and exclusive property of Trusted Insight. Nothing in this communication nor the contents of this blog are intended to imply that such investments may be considered “conservative”, “safe”, “risk-free” or “risk averse.” It should be noted that past performance is not indicative of future results.
Two companies highlighted in the October 2016 edition of The Liquidity Watch List have already achieved exits with two other featured companies currently undergoing the IPO process. Appdynamics, which was about to IPO in January 2017, was snapped up by Cisco in a last-minute acquisition just 24 hours before its entrance to the public markets. Snap IPO’ed in March at $17 per share; it is currently up 28% with its current share price at $21.82 (as of 3/22/17). Both Cloudera and Okta recently filed their S-1 on March 9 and 13, respectively.
At the start of the year, the market for tech IPOs, which has been relatively frozen for much of 2016, has seen several successful launches. Following an influx of successful liquidity events from late 2016 to early 2017, it appears that liquidity season is upon us. Here are the top five private companies we believe are likely to see an exit by the end of 2017.
Spotify
Founded: 2006
Description: This Luxembourg-based company provides on-demand music streaming to more than 100 million active users (50 million paid subscribers). It is the current market leader for on-demand music streaming, with more than twice the number of paid subscribers as the next largest player, Apple Music.
Total Funding Raised: $2 billion
Latest Financing: $1 billion convertible debt round in March 2016
Notable Investors: Accel Partners, TPG, Goldman Sachs, Founders Fund, Fidelity Investments, Creandum
Expected Liquidity Event: IPO
Argument: A glaring signal that the company plans to go public are the punitive terms that exist on its convertible debt financing. After a year, for every six months Spotify does not IPO, the discount rate increases by 2.5%, and the interest rate increases by 1% (capped at 10%). The company has also recently appointed Barry McCarthy (previous CFO of Netflix) as its new CFO, which is a strong indicator that management intends to navigate public markets.
Dropbox
Founded: 2007
Description: This Silicon Valley-based company provides cloud storage and file synchronization services for both personal consumers and enterprise clients. As of December 2016, Dropbox has over 500 million users, with the software being used by eight million businesses worldwide.
Total Funding Raised: $1.1 billion
Latest Financing: Series C round at a $10.4 billion post-money valuation in January 2014
Notable Investors: Accel Partners, Benchmark, BlackRock, Glynn Capital Management, Goldman Sachs, Greylock Partners, GSV Ventures, Index Ventures, IVP, JP Morgan Chase, Morgan Stanley, QueenBridge Venture Partners, Salesforce Ventures, Sequoia Capital, SV Angel, T. Rowe Price and Y Combinator
Expected Liquidity Event: IPO
Argument: Dropbox is now over 10 years old and has matured into a company that certainly holds the size and value to enter the public markets. As of 2017, Dropbox CEO Drew Houston stated that Dropbox was en route for a $1 billion revenue run rate and was free-cash flow positive. To put this into perspective, Box (Dropbox’s closest public competitor) reported in Q4 2016 that it generated only $103 million in revenue. Dropbox’s improving financials certainly justify it going public, but its rapidly increasing user base implies that it will continue to thrive long after IPO. Dropbox user base grew from approximately 400 million in June 2015 to 500 million in March 2016, representing a 25% year-over-year growth. This is a significant feat considering how large the company already is. More impressively, it continues to grow quickly in the face of multiple competing product lines such as G Suite (Google), Workplace (Facebook), Windows/Office cloud offerings from Microsoft, Slack, Asana, Atlassian and Box, among others. Gartner predicted that there are 130 companies in just the electronic file storage and sync market alone.
DocuSign
Founded: 2003
Description: This San Francisco-based company provides electronic signature technology and digital transaction management services for contracts and signed documents. Its core offerings include authentication services, user identity management and workflow automation.
Total Funding Raised: $558 million
Latest Financing: Preferred equity financing on October 8, 2015 at a post-money valuation of $3.1 billion
Notable Investors: Bain Capital Ventures, Accel Partners, ClearBridge, Citi Ventures, Deutsche Telekom, Intel Capital, Dell Ventures, IT Venture, Microsoft, Wellington Management, ICONIQ Capital, Comcast Ventures, Fidelity Investments, GV, Ignition Venture Partners, Generation Investment Management, Bessemer Venture Partners and Kleiner Perkins Caufield & Byers
Expected Liquidity Event: IPO or Acquisition
Argument: DocuSign is set to pursue an IPO following the hiring of executives with public experience over the past few years. Chief Financial Officer Michael Sheridan was the CFO of FireEye during its IPO, and General Counsel Reggie Davis was general counsel of Zynga during its public debut. Both hires were made within the past two-and-a-half years.
DocuSign is equally ripe for acquisition. Larger companies that have workflow solutions, but not digital signature products are likely to make offers due to DocuSign’s product synergy with other document management offerings. Smaller startups in this sector that have been acquired in the past are DotLoop (to Zillow), Cartavi (to DocuSign), RightSignature (to Citrix Systems), Silanis Technology (to VASCO Data Security) and EchoSign (to Adobe).
Lyft
Founded: 2012
Description: This Silicon Valley-based company provides on-demand ride-sharing logistics for more than 100,000 registered users in more than 65 U.S. cities. It trails only Uber in terms of U.S. market share.
Total Funding Raised: $2 billion
Latest Financing: Series F round at a $5.5 billion post-money valuation in January 2016
Notable Investors: Andreessen Horowitz, Founders Fund, General Motors, Icahn Enterprises, Mayfield Fund, Alibaba, Didi Chuxing
Expected Liquidity Event: Acquisition
Argument: Lyft is likely to pursue a liquidity event due to the fact that it has sought an acquisition very recently. It hired Qatalyst (the famous bank for brokering high-profile technology deals) last year to help source a buyer. It is widely reported that the company held acquisition talks with General Motors, which ultimately broke down due to disagreements over price. Nonetheless, Lyft is an attractive acquisition target for a larger business seeking entry into the U.S. ride sharing market due to its relatively low price point (compared to Uber).
MongoDB
Founded: 2007
Description: MongoDB is a NoSQL database engine that generates revenue through licensing backup and automation software, security features and enterprise consulting and training.
Total Funding Raised: $312 million
Latest Financing: $80 million Series F preferred equity financing on January 9, 2015 at a post-money valuation of $1.8 billion
Notable Investors: Goldman Sachs Group, VSL Partners, BlackRock, EMC Ventures, Fidelity Investments, KG Investments, Salesforce Ventures, T. Rowe Price, In-Q-Tel, Intel Capital, New Enterprise Associates, Sequoia Capital, Flybridge Capital Partners, Union Square Ventures, Aeon Funds and Altimeter Capital Management
Expected Liquidity Event: IPO
Argument: MongoDB has been a unicorn since 2013, and its recent executive team replacements signal a potential move to the public market.
Last year, the company hired Michael Gordon as chief financial officer, Carlos Delatorre as chief revenue officer and Meagen Eisenberg as chief marketing officer. Previously Gordon was the CFO at Yodle, a marketing company where he filed paperwork for an IPO (the deal has since been postponed) and was also a managing director at Merrill Lynch where he spearheaded IPO and M&A deals. In addition, with the company’s last funding round taking place nearly two years ago, an IPO would provide a fresh source of capital to sustain its business expansion. With the 2017 public tech markets expected to be strong, MongoDB is likely to time a public debut by end of next year.
You can view Trusted Insight's full list of Liquidity Watch Lists here.
Important Disclosures
This blog is for informational and educational purposes only. Nothing in this blog constitutes investment, legal or tax advice. This blog is not intended to constitute any offer or solicitation to buy or sell securities. Offers of securities or investment advisory services may be made only pursuant to appropriate offering or other disclosure documents, and only after prospective investors have had the opportunity to discuss all matters concerning the prospective investment or engagement with their adviser and the issuers of the securities. In addition, neither TI Platform Fund I GP, LLC nor any of its affiliated entities (collectively, “Trusted Insight”) may offer interests in any of its unregistered funds or accept subscriptions from any potential investors with whom it has no prior or existing relationship until the expiration of a 30-day “cooling off” period with each potential investor, respectively.
This blog is not an offer to sell, or solicitation of offers to buy, securities. Investments in a private fund can be made only pursuant to such fund’s subscription documents and private placement memorandum and only after careful consideration of the risk factors set forth therein. Non private fund investment advice shall be provided in accordance with the investment management agreement. Investments entail significant risks and are suitable only for certain investors as part of an overall diversified investment strategy and only for investors able to withstand a total loss of investment. Investment advice offered by Trusted Insight is typically available only to investors who meet statutory qualifications as promulgated under the Investment Advisers Act of 1940 and the Securities Act. In addition, there can be no assurance that current investments will be realized as projected. Actual realized returns will depend on, among other factors, future operating results, the value of assets and market conditions at the time of disposition, any related transaction costs, and the timing and manner of sale, all of which may differ from the assumptions on which the information contained herein is based. It should not be assumed that any issuers described herein were or will be profitable. Forward-looking statements involve known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples and should bear in mind that past performance is not necessarily indicative of future results. Neither Trusted Insight nor any of its affiliates or principals nor any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date that they were originally made. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
Information included herein does not constitute investment advice and should not be viewed as a current or past recommendation to buy or sell any securities or to adopt any investment strategy.
This blog is not to be distributed or disseminated without the prior written consent of Trusted Insight. This blog and any of the content therein is the sole and exclusive property of Trusted Insight. Nothing in this communication nor the contents of this blog are intended to imply that such investments may be considered “conservative”, “safe”, “risk-free” or “risk averse.” It should be noted that past performance is not indicative of future results.