In second quarter of 2018, the SharesPost Private Growth Index, which tracks valuations for 106 private growth firms, increased 13.7 percent to 145.56 from 128.04 from the previous quarter. By comparison, the S&P 500 was moderately up 2.9 percent whereas the Dow Jones U.S. Technology Index increased 6 percent during the same period.
Since its launch on Jan 1st, 2017, the SharesPost Index has increased 45.5 percent through June 30, 2018. By comparison, S&P 500 has increased 21.42 percent whereas the Dow Jones U.S. Technology Index has increased 48.55 percent during the same period.
Preliminary Q3 data through Aug 31, 2018 suggests the SharesPost index continues to outperform benchmark indices as the bull market has started to show signs of stalling recently. The Q3 2018 Index is due out in early October.
The cumulative implied valuation of the 106 private growth companies included in the Index has increased from $317 billion as of previous quarter to $353 billion at the end of second quarter of 2018. The median implied valuation of the 106 companies included in the Index has increased slightly to $1.23 billion at the end of second quarter from $1.10 billion at the beginning of this year.
Since the first quarter of 2017, the Private Tech Growth index steadily grew at roughly 5 percent. Private asset growth has been slower compared to the public indexes during 2016 and 2017. But, we see the trend change as witnessed by the IPO and M&A activity in 1H:2018. It’s been a fairly busy few months for investors in the Private Tech Growth asset class. We think this is a sign of things to continue in later half of 2018. At the same time, we believe mega consumer Internet unicorns such as Airbnb and Uber will likely wait until 2019. We believe the recent spurt of IPOs in 2018 and the favorable response by public investors bodes well for private tech.
The key events affecting the Index performance during the second quarter of 2018 were:
(+) Upside drivers: Primary funding rounds during this period included Dataminr (Series E), Lyft (Series I), OpenDoor (Series E and E1), Tanium (Series G), CrowdStrike (Series E and E-1) and Robinhood (Series D). On average, the valuation of the companies that completed a primary funding round during Q2:2018 increased by 194 percent. We did not track any notable acquisitions of companies included in our 2018 Index. There were four Initial Public Offerings (IPOs) during Q2:2018 of companies tracked in our 2018 Index of which three were successful exits had namely Docusign, Avalara and Zuora.
(-) Downside drivers: We did not track any notable down round funding’s during Q2:2018. However, we observed modest downward valuation trends for companies including Fuze. Domo had a down-round IPO in the second quarter. Also, mutual funds modestly downgraded the valuations of mega-cap private growth companies such as Pinterest and Palantir.
As of Aug 31, 2018, our preliminary data indicates that the Index has increased 27.03 percent compared to 8.52 percent increase in the S&P 500 and a 20.824 percent increase in the Dow Jones U.S. Technology Index for YTD 2018. Key contributors to performance include companies that completed primary funding rounds i.e. DoorDash (Series E), One Medical Group (Series I), Slack (Series H and H-1), OfferUp (Series D). There was one successful IPO exit for Bloom Energy and two notable acquisitions of companies Github for 7.5B and Appnexus for approx. 2B respectively will result in positive trend for Q3 SP Index. Amongst the index companies, there have been a total of 9 exits till Aug 31, 2018 either via an IPO or M&A, averaging at about 1 per month.
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