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 and Disclosures

CONFLICTS: This report is being published by SharesPost Research LLC and 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. SP Investments Management is the investment manager of the SharesPost 100 Fund, a registered investment company, and other funds.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own personal financial advisors before making any investment decisions based on this report. 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 services. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or advisability of a particular investment or transaction, (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

Information regarding companies in the SharesPost 100 List available on the website has been collected from or generated from publicly available sources. The availability of company information does not indicate that these companies have endorsed, supported, or otherwise participated with SharesPost. Company “thesis” is the opinion of SharesPost and is not a recommendation to buy, sell, or hold any security of such company.

Investors should be aware that, at any given point in time, the SharesPost 100 Fund (the “Fund”) may or may not have an ownership interest in any of the issuers discussed in the report. Accordingly, investors should not rely on the content of this report when deciding whether to buy, hold, or sell interests in the Fund. Instead, investors are encouraged to do their own independent research. Before investing in the Fund, investors are cautioned to carefully consider the investment objectives, risks, charges, and expenses before investing. For a prospectus containing more information about the Fund, please visit www.sharespost100fund.com. Read the prospectus carefully before investing.

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

Analyst compensation is based upon various factors, including the overall performance of SharesPost Inc. and its subsidiaries and the performance and productivity of such analyst, including (1) feedback from clients of the SharesPost Financial Corporation and other stakeholders in our ecosystem, (2) the quality of such analyst’s research, and (3) the analyst’s contribution to the growth and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost Inc., including brokerage sales.

DISCLAIMER: This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

Any securities offered are offered by SharesPost Financial Corporation, a member of 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 and involves a high degree of risk. It should only be considered as a long-term investment. You must 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. You should complete your own independent due diligence regarding the investment, including obtaining additional company information, opinions, financial projections, and legal or other investment advice.

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, SharesPost Investment Management, the SharesPost 100 Fund, and the SharesPost 100 List are all registered trademarks of SharesPost Inc. All other trademarks are the property of their respective owners.

Copyright © SharesPost, Inc. 2019. All rights reserved.

Rohit Kulkarni

Rohit Kulkarni

Rohit is the Managing Director, Private Investment Research for SharesPost Research LLC. Prior to joining SharesPost, Rohit was a Vice President, Senior Analyst at RBC Capital Markets.
Please Read These Important Legal Notices and Disclosures

CONFLICTS: This report is being published by SharesPost Research LLC and 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. SP Investments Management is the investment manager of the SharesPost 100 Fund, a registered investment company, and other funds.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own personal financial advisors before making any investment decisions based on this report. 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 services. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or advisability of a particular investment or transaction, (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

Information regarding companies in the SharesPost 100 List available on the website has been collected from or generated from publicly available sources. The availability of company information does not indicate that these companies have endorsed, supported, or otherwise participated with SharesPost. Company “thesis” is the opinion of SharesPost and is not a recommendation to buy, sell, or hold any security of such company.

Investors should be aware that, at any given point in time, the SharesPost 100 Fund (the “Fund”) may or may not have an ownership interest in any of the issuers discussed in the report. Accordingly, investors should not rely on the content of this report when deciding whether to buy, hold, or sell interests in the Fund. Instead, investors are encouraged to do their own independent research. Before investing in the Fund, investors are cautioned to carefully consider the investment objectives, risks, charges, and expenses before investing. For a prospectus containing more information about the Fund, please visit www.sharespost100fund.com. Read the prospectus carefully before investing.

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

Analyst compensation is based upon various factors, including the overall performance of SharesPost Inc. and its subsidiaries and the performance and productivity of such analyst, including (1) feedback from clients of the SharesPost Financial Corporation and other stakeholders in our ecosystem, (2) the quality of such analyst’s research, and (3) the analyst’s contribution to the growth and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost Inc., including brokerage sales.

DISCLAIMER: This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

Any securities offered are offered by SharesPost Financial Corporation, a member of 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 and involves a high degree of risk. It should only be considered as a long-term investment. You must 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. You should complete your own independent due diligence regarding the investment, including obtaining additional company information, opinions, financial projections, and legal or other investment advice.

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, SharesPost Investment Management, the SharesPost 100 Fund, and the SharesPost 100 List are all registered trademarks of SharesPost Inc. All other trademarks are the property of their respective owners.

Copyright © SharesPost, Inc. 2019. All rights reserved.