April 11, 2018 | Blog

Private Tech Growth Companies Post Double Digit Growth in 2017

SharesPost Private Growth Index Reports 5.2 percent Q/Q Growth, in line with the past couple of quarters

Private tech investments continued to generate solid growth heading into 2018.

In fourth quarter of 2017, the SharesPost Private Growth Index, which tracks valuations for 87 private growth firms, increased 5.2 percent to 118.48 from 112.63 from the previous quarter. By comparison, the S&P 500 rose 6.1 percent and the Dow Jones U.S. Technology Index jumped 8.5 percent during the same period.

For the full 2017, the SharesPost index rose 18.5 percent, lagging behind both the S&P 500 (19.4 percent) and the Dow Jones U.S. Technology Index (35.4 percent).

Preliminary Q1 data suggests the SharesPost index continues to underperform the bullish public markets. The Q1 2018 Index is due out in early July.

However, from a longer term perspective, private growth firms significantly outpaced the broader indexes. From 2015 to 2017, the SharesPost index increased approximately 102.9 percent; the S&P 500 rose 29.9 percent and the Dow Jones index increased 56.3 percent.

Recapping 2017 SharesPost Private Growth Index
Recapping 2017 SharesPost Private Growth Index
Note: Chart includes preliminary data for SharesPost Private Growth Index starting at 1/1/2018
SharesPost Private Growth Index: 1/1/2015 -1/28/2018
SharesPost Private Growth Index: 1/1/2015 -1/28/2018
Note: Chart includes preliminary data for SharesPost Private Growth Index starting at 1/1/2018
The SharesPost Private Growth Index consistently rose the past 5 quarters

Since the last quarter of 2016, the Private Tech Growth index steadily grew at roughly 5 percent. Although private asset growth has been slower compared to the public indexes, we believe the recent spurt of IPOs in 2018 and the favorable response by public investors bodes well for private tech.

SharesPost Private Growth Index by Quarter from Q3 2015 through Q3 2017

SharesPost Private Growth Index by Quarter from Q3 2015 through Q3 2017

Q4 SharesPost Private Growth Index Performance Drivers

The key events affecting the Index performance during the fourth quarter of 2017 were:

(+) Upside drivers: Primary funding rounds during this period included SpaceX (+111 percent), Affirm (+94 percent), Carbon (+54 percent), Anaplan (+37 percent) and Slack (+35 percent). On average, the valuations of these companies increased by 66 percent. There weren’t any notable acquisitions.

(-) Downside drivers: MongoDB’s down-round IPO and its subsequent weak stock performance, a down-round for The Honest Company (-51 percent) and the exit of Lithium Technologies (Vista Equity Partners acquired it) contributed towards a weaker index performance. Mutual funds also modestly downgraded the valuations of mega-cap private growth companies such as Uber and Palantir.

2018 Index Rebalance Results

Over the past 3 years, the Private Tech Growth Index has more than doubled the number of companies in its index. The cumulative valuation of these companies has almost doubled from $171 billion in 2015 to over $300 billion by end of 2017. IT added 33 new companies to the index in 2017 alone, reconfirming the growth of companies in this asset class.

Amongst the index companies, there have been a total of 13 exits in 2017, either via an IPO or M&A, averaging at about 1 per month. Favorable market conditions and the large amount of dry powder still available to investors are prompting companies to stay private longer.

Companies added to the Index in 2018
Addepar EverFi Peloton
Bill.com Famer’s Business Network Planet Labs
Blend Labs Flexport Proterra
Casper Sleep Ginkgo Bioworks Reddit
ChargePoint Guardant Health Robinhood
Clover Health Human Longevity Rubrik
Coinbase InVisionApp Snowflake Computing
Compass Kateeva Unity Technologies
Cybereason MapBox Uptake Technologies
Databricks Moda Operandi Via (Carpooling)
Desktop Metal Netskope Zoom Video Communications
Companies removed from the Index in 2018
Name Reason for Removal Date of Event
ServiceMax M&A 1/10/17
Simplivity M&A 1/17/17
Kabam M&A 2/23/17
Snap Inc IPO 3/2/17
Mulesoft IPO 3/17/17
Appdynamics M&A 3/22/17
Okta IPO 4/7/17
Sungevity M&A 4/26/17
Cloudera IPO 4/28/17
Blue Apron IPO 6/28/17
Tintri IPO 6/30/17
Lithium Technologies M&A 10/4/17
MongoDB IPO 10/19/17

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.