Two more unicorns have joined the 2019 IPO bonanza: The RealReal and Adaptive Biotechnologies have both filed an S-1, giving public investors a first view into the financial condition of the companies. These companies exhibit financial characteristics similar to that of other unicorns—revenue growth over 30 percent, with growing expenses. These companies operate in perhaps the most divergent of verticals, but comparing them in the context of unicorn exits may be useful. While the scheduled IPOs come at a time of heightened volatility in public markets and an announced probe into mega-cap tech companies, investors have shown salubrious demand for innovative companies to date.
The RealReal, founded in 2011 and recently valued at just over $1 billion, operates a consignment marketplace platform geared toward luxury goods. While matching a buyer and seller for a given good is a proven business model, those involving the resale of luxury goods have limited historical benchmarks. The tailwinds generated from the perceived allure of luxury coupled with the millennial modus operandi to use internet-based platforms may benefit The RealReal going forward. The company grew revenue 55 percent from 2017 to 2018, reaching over $200 million in fiscal year 2018. That said, total operating expenses grew at a similar pace over the same period; this trend may result in headwinds for the company as public investors look to mitigate risk in periods of increasing volatility.
Adaptive Biotechnologies takes a novel approach to medicine development. That is, the company seeks to leverage the human “adaptive immune system” to pursue solving our most daunting medical challenges. Their gene-first stature chases treatment of illnesses ranging from cancer to infectious diseases. They peg their potential market at over $48 billion. Revenue grew at a healthy 45 percent from 2017 to 2018, while total operating expenses rose 27 percent, to just over $105 million. Although drug development is an inherently expensive endeavor, current finances hint that the company has competency in controlling costs. Recently, the company received an investment from Microsoft and stated in its S-1 that it will leverage the tech giant’s machine learning capabilities. The company also has a partnership with Genentech to collaborate on cellular therapies to treat cancer.
These unicorns will likely enter public markets by mid-July and, if they are as well received as the majority of unicorn IPOs this year then, private investors may have something to cheer. Of course, the state of public markets could influence the eventual outcome. As they approach their public debuts, we will continue to monitor these firms, as well as how the private growth asset class as a whole is received by Wall Street.
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