Private Growth Valuations Rise in Q3 2018 Amid Rising Public Markets Volatility
January 15, 2019 | Blog

Private Growth Valuations Rise in Q3 2018 Amid Rising Public Markets Volatility

SharesPost Private Growth Index Reports 4.7% Q/Q growth, slightly trailing S&P 500

In third quarter of 2018, the SharesPost Private Growth Index, which tracks valuations for 106 private growth firms, increased a moderate 4.7 percent to 152.47 from 145.62 from the previous quarter. By comparison, the S&P 500 grew 7.2 percent whereas the Dow Jones U.S. Technology Index jumped 8.8 percent during the same period. Private asset growth has been slower compared to the public indexes. But we see that trend changing. Thanks to the volatility hitting the public indexes in Q4 2018, December represents one of the worst months in recent history for the S&P 500.

Since its launch on Jan 1st, 2017, the SharesPost Index increased 52.47 percent through Sept 30, 2018. By comparison, S&P 500 grew 30.15 percent whereas the Dow Jones U.S. Technology Index jumped 61.57 percent during the same period.

For the first 9 months of 2018, the SharesPost Index increased 28.7 percent. By comparison, S&P 500 gained 9 percent whereas the Dow Jones U.S. Technology Index increased 19.3 percent during the same period.

Preliminary Q4 data through Nov 30, 2018 suggests the SharesPost index outperformed benchmark indices as the bull market recently started to show signs of stalling. Public markets have softened and become more volatile since Q3 this year. Yet the IPO outlook for 2019 remains bright. We will release the results from Q4 2018 Index along with our annual index rebalancing data in early April 2019.

On a cumulative basis, from Jan 1, 2015 to June 30, 2018, the SharesPost index increased approximately 161.2 percent; the S&P 500 rose 41.6 percent and the Dow Jones index increased 86.5 percent.

The cumulative implied valuation of the 106 private growth companies included in the Index increased from $353 billion from the second quarter to $374 billion at the end of third quarter of 2018. The median implied valuation of these companies during this period increased slightly from $1.21 billion to $1.23 billion.

Q3:2018 SharesPost Private Growth Index Performance Drivers

The key events affecting the Index performance during the third quarter of 2018 were:

(+) Upside drivers: Primary funding rounds during this period included DoorDash (Series E), Slack (Series H and H-1), OfferUp (Series D), 23andMe (Series F-1), Actifio (Series G), Unity Technologies (Series D-1), One Medical Group (Series I) and Compass (Series F).

On average, the valuation of the companies that completed a primary funding round during Q3:2018 increased by 150 percent.

There were two notable acquisitions of index companies: AppNexus for $2 billion and GitHub for $7.5 billion. There was one IPO during Q3:2018: Bloom Energy.

(-) Downside drivers: We did not track any notable down round fundings during Q3:2018.

Preliminary Q4:2018 trends indicate continued outperformance of the SP Index

As of Nov 30, 2018, our preliminary data indicates that the Index increased 38.3 percent compared to 3.2 percent increase in the S&P 500 and a 6.8 percent increase in the Dow Jones U.S. Technology Index for YTD 2018. Key contributors to performance include companies that completed primary funding rounds, including Coinbase (Series E), Netskope (Series F), InstaCart (Series F) and Snowflake (Series F).

There was two successful IPO exits in Guardant Health Inc. and Anaplan Inc. There was one notable acquisition: Cylance for 1.5 billion , which will result in positive trend for Q4 SP Index.

Among the index companies, there have been a total of 12 exits as of Nov 30, 2018, averaging to about 1 IPO/M&A deal per month.

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.

Alejandro Ortiz

Alejandro Ortiz

Alejandro is a Research Analyst, Private Investment Research for SharesPost Research LLC. Prior to joining SharesPost, he was a Valuation Analyst at Duff & Phelps with a focus on TMT industries.

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.