Primary Funding Scorecard: 2019 on Pace for Record Year
August 15, 2019 | Blog

Primary Funding Scorecard: 2019 on Pace for Record Year

To date, 2019 has been one for the history books.

The mega-IPOs of Uber, Lyft, and Pinterest, as well as the dizzying rise of Beyond Meat and Zoom Video post public debut, have captured the interest of investors in 2019. As important, the venture capital ecosystem continues to be a prolific engine of innovation, both in capital raised and the number of companies seeking that capital. To see why 2019 is on track to be a record-breaking year, it’s instructive to do a 10-year look-back at primary funding trends during the current expansion.

Capital Flows Rise 550%

In all years since 2009 (with the exception of 2016) the Information Technology (IT) sector has amassed more investor capital year-over-year, according to our examination of Pitchbook data. Private growth tech companies attracted $11.6 billion in capital in 2009, but that jumped to $75.5 billion at year end 2018 – an increase of 550 percent. To control for being only about halfway through 2019, we normalized our analysis on a monthly basis.

As capital has rushed into private growth companies, the size of the deals has changed. The average monthly raise is at an all-time high, even though the average number of monthly deals is slightly down in 2019 YTD. Through July, $6.5 billion has been invested in private IT companies, on average, for each month of 2019. This amount represents an 83 percent increase since 2014 and a 578 percent leap since 2009. Comparatively, average monthly deals have climbed 41 percent since 2014 and 229 percent since 2009. The difference in capital invested and deals is telling. Our analysis found that on average companies are getting twice the capital per deal now compared to 2009 and 24 percent more compared to 2014.

Rapid primary pace

Just seven months into the year, 19 companies have raised more than one round over $10 million, according to Pitchbook data. In aggregate these “double dippers” corralled $3.3 billion. While substantial, that amount is just 7 percent of the capital raised this year for private IT companies. Of those double dipping companies with valuation data points, the median step up in valuation primary round over primary round was 82 percent. The range of step up was from 13 percent for SpaceX to 308 percent for Mattermost. Private investors in these cases were able to see paper gains in rapid succession. Such increases are by no means guaranteed or lasting, but 2019 has to date been one of healthy primary raises. We expect the macro trends to continue for the remainder of the year.

All in, we are seeing both a rise in companies seeking capital and larger funding commitments to those companies. Another positive indicator: Softbank is committing more capital to the space. Earlier in July, SoftBank said its second Vision Fund was expected to surpass the size of the first Vision Fund, which was $100 billion. Softbank’s willingness to invest, as well as the strong appetite for private tech growth companies by other institutional investors, suggests the innovation economy could be well-funded for the foreseeable future.

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CONFLICTS

This report is distributed by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Research LLC, SharesPost Financial Corporation, and SP Investments Management, LLC, an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost, Inc.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own financial advisors before making any investment decisions. None of the information contained in this report represents an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation, or sale would be unlawful under the securities laws of any such jurisdiction.

This report does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

ANALYST CERTIFICATION

The analyst(s) certifies that the views expressed in this report accurately reflect the personal views of such analyst(s) about the subject matter therein, including all of the subject securities or issuers, and that no part of such analyst compensation was, is, or will be during their employ directly or indirectly related to their specific views contained in this report.

Analyst compensation is indirectly based upon the growth and success of SharesPost, Inc., including the overall performance of its subsidiaries, the individualized performance of any such analyst, and the development and progression of the overall research effort. SharesPost, Inc. earns revenue from, among other avenues, brokerage sales, and therefore the analyst may indirectly benefit from research reports that have the ultimate effect of increasing trading activity, either through SharesPost Financial Corporation and/or with SharesPost Investment Management, LLC.

DISCLAIMER

This report does not contain a complete analysis of every material fact regarding any issuer, industry, transaction, or security. The opinions expressed in this report reflect the judgment of the analyst at a specific point in time and are subject to change. The information contained in this report has been obtained from sources the analysts consider to be reliable; however, there is no guarantee the any of the information is accurate.

Securities referenced in this report may be offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.

Copyright SharesPost, Inc. 2019. All rights reserved.

James Cheap

James Cheap

James is a Research Analyst, Private Investment Research for SharesPost Research LLC. Prior to joining SharesPost, he was a Senior Research Analyst at Equilar with a focus in corporate governance and analytics.

PLEASE READ THESE IMPORTANT LEGAL NOTICES & DISCLOSURES

CONFLICTS

This report is distributed by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Research LLC, SharesPost Financial Corporation, and SP Investments Management, LLC, an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost, Inc.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own financial advisors before making any investment decisions. None of the information contained in this report represents an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation, or sale would be unlawful under the securities laws of any such jurisdiction.

This report does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

ANALYST CERTIFICATION

The analyst(s) certifies that the views expressed in this report accurately reflect the personal views of such analyst(s) about the subject matter therein, including all of the subject securities or issuers, and that no part of such analyst compensation was, is, or will be during their employ directly or indirectly related to their specific views contained in this report.

Analyst compensation is indirectly based upon the growth and success of SharesPost, Inc., including the overall performance of its subsidiaries, the individualized performance of any such analyst, and the development and progression of the overall research effort. SharesPost, Inc. earns revenue from, among other avenues, brokerage sales, and therefore the analyst may indirectly benefit from research reports that have the ultimate effect of increasing trading activity, either through SharesPost Financial Corporation and/or with SharesPost Investment Management, LLC.

DISCLAIMER

This report does not contain a complete analysis of every material fact regarding any issuer, industry, transaction, or security. The opinions expressed in this report reflect the judgment of the analyst at a specific point in time and are subject to change. The information contained in this report has been obtained from sources the analysts consider to be reliable; however, there is no guarantee the any of the information is accurate.

Securities referenced in this report may be offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.

Copyright SharesPost, Inc. 2019. All rights reserved.