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Liquidity Watch List: Major VC Exits Ahead As IPO Markets Heat Up

by trusted insight posted 2years ago 1874 views
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 its newest monthly segment, The Liquidity Watch List, to highlight five companies with a high degree of likelihood to be acquired or pursue a public offering in the near future.

In October, it appears the market for tech IPOs, which has been relatively frozen for much of 2016, is beginning to thaw. Following the successful IPO of Twilio in June, there has been an influx of IPO filings. That, coupled with the NASDAQ hitting all-time highs, signals that liquidity season is upon us. Here are the top five private companies 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 (40 million paid subscribers) in over 59 countries. 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, TPGGoldman Sachs, Founders Fund, Fidelity Investments, Creandum
Expected Liquidity Event: IPO 
Argument: The most telling signs 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% (until 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.


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 only trails 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 an acquisition following its recent hire of Qatalyst (the famous bank for brokering high-profile technology deals). 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).


Snap (Snapchat)
Founded: 2011
Description: This Silicon Valley-based company provides ephemeral mobile messaging capabilities for more than 59 million U.S. users (31.6% of U.S. social media users). The company has acquired users faster than any other social media company in history.
Total Funding Raised: $2.6 billion
Latest Financing: Series F round at a $17.8 billion post-money valuation in May 2016
Notable Investors: Alibaba, Kleiner Perkins Caufield & Byers, IVP, Benchmark Capital, General Catalyst, Kingdom Holding Company, Lightspeed Venture Partners 
Expected Liquidity Event: IPO
Argument: It is no secret that Snapchat is not interested in being acquired. The firm’s founder and CEO, Evan Spiegel, stated it plainly at Re/code’s Code Conference in May 2015. “We need to IPO,” he said. “We have a plan to do that.” The firm continues to aggressively pursuing that path. It quietly recruited an IPO specialist, Stan Meresman, to the board in May 2016. It is widely rumored that Snapchat is working toward a public listing at a $25+ billion valuation as early as the end of Q1 2017.


AppDynamics
Founded: 2008
Description: This Silicon Valley-based company has disrupted the application performance monitoring space via its range of application/IT analytics tools that effectively scale with growing enterprises.
Total Funding Raised: $335 million
Latest Financing: Series F round at a $1.8 billion post-money valuation in December 2015
Notable Investors: Battery Ventures, IVP, Kleiner Perkins Caufield & Byers, Greylock Partners, Lightspeed Venture Partners, Goldman Sachs
Expected Liquidity Event: IPO
Argument: AppDynamics hired Goldman Sachs and Morgan Stanley as lead underwriters in June 2016, a telling sign that an IPO is in store for the near future.


Okta
Date Founded: 2009
Description: This Silicon Valley-based company provides identity management and secure connection capabilities for thousands of mid- to large-size enterprises.
Total Funding Raised: $231.5 million
Latest Financing: Series F round at a $1.2 billion post-money valuation in September 2015
Notable Investors: Andreessen Horowitz, Greylock Partners, Sequoia Capital, Floodgate Fund, Janus Capital Group, Khosla Ventures, SV Angel 
Expected Liquidity Event: IPO
Argument: Okta hired Goldman Sachs in June 2016 to likely lead an IPO. There are also reported sources that the company has floated acquisition talks with its technology peers and are more likely to pursue exit by sale if it could fetch a higher valuation than an IPO.

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