Taking Stock in Private Tech – Mid-Year Investor Survey Recap
Bull-Bear Gap Widens, Favoring Private Tech Companies As Most Investors Anticipate a Continuing Rise in Valuations
The results of SharesPost’s mid-year investor sentiment survey are in, and they confirm what our year-end 2016 sentiment survey projected: Investors of all types remain predominantly bullish about the prospects for private tech companies in 2017. In fact, at mid-year, we observed a marginally higher level of positive investor sentiment than we did in December 2016. Investors continue to prefer private tech shares (along with public small-cap stocks) and expect 2017 to be a prolific year for unicorn creation. In terms of sectors, investors continue to like big data, security, VR/AR, and fin-tech, and they increasingly believe that buying and selling private shares on the secondary market is an attractive investment opportunity.
Our mid-year findings come from over 325 accredited individual and institutional tech investors, who let us know their expectations for the rest of the year. Survey participants represented a wide range of private- and public-market investment styles. Although all such surveys have a degree of sampling bias, the results of this survey were surprisingly consistent.
Top 5 highlights include:
- Investors are more bullish about prospects for private tech company valuations. 68 percent of surveyed investors think private company valuations will increase over the next 12 months, while 15 percent believe valuations of private tech companies will decrease over the same time period. This is a demonstrably more bullish response than the one we heard at the end of 2016, when only 49 percent of surveyed investors believed that valuations would rise during 2017, and 28 percent believed valuations would fall. The bull-bear gap for private tech companies has widened over the past six months when compared to the corresponding gap for public market performance expectations. Clearly, on the margin, investors are more positive about the prospects of private tech companies over the next 12 months than they are about publicly traded shares.
- Investors continue to prefer small-cap or early-stage companies. We asked survey respondents about their preferences for public large-cap tech, private large-cap tech, public small-/mid-cap tech, private small-/mid-cap tech, and early/seed investments. 71 percent of the surveyed investors chose small companies: either private or public small-/mid-cap companies or early-stage companies. These findings largely aligned with the roughly 73 percent of survey respondents who indicated a preference for smaller companies. Interestingly, we observed a stronger bias among institutional investors toward the small-/mid-cap asset classes.
“Thinking about your investments over the next 12 months, which of the following asset classes do you believe are likely to deliver the best returns?”Source: SharesPost Research; for 2017 mid-year survey, N=325 survey respondents; for 2016 year-end survey, N=600 survey respondents
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