September 20, 2017 | Webinar

Dropbox: Going From Storage to Collaboration and Profits

Rohit Kulkarni 00:04

Okay. We’re going to go ahead and get started. Good morning to everyone on the West Coast and good afternoon for anyone who’s joining us from the East Coast. On behalf of SharesPost, I would like to welcome you to today’s webinar. I am Rohit Kulkarni, Managing Director of the private research group at SharesPost, where I oversee SharesPost’s website content, data, and research group. Before we jump into the main part of the webinar, for anyone who’s joining us for the first time, SharesPost is a thinktech forum that brings together shareholders, individual and institutional investors to create liquidity within the private growth asset class. These are a few companies that we have transacted with. We have been in business with for almost seven years now. We launched our website, which we call as SharesPost 2.0, late last year, with a lot of data, content, and research. These are a few of the research reports that we have published. All of them are fully available for download for investors on the platform. We continue to conduct few webinars, probably once every three, four, five weeks. These are the ones we have done over the last six, seven months. We’d welcome any ideas, and we continue to stay on top of market trends, bid IPOs, M&A trends, or BC trends.

Rohit 01:29

But jumping into the main part of the webinar, last week we published a detailed, deep-dive report on Dropbox, which included a lot of proprietary work, fundamental analysis. Prior to this, we have published reports on Uber, Airbnb, and Pinterest, and many more to come. This is a quick kind of agenda for today. I will run through these slides over the next 15, 20 minutes. There will be a Q and A session at the end. If you have a question, please type it in the questions box, which should be located on the right-hand side of your screen. And, I have with me, Mark Kroger who will be pooling questions as well as managing the webinar. Okay. In terms of valuation and fundraising, Dropbox has raised about $650 million in total equity since its inception. It has, in fact, raised more debt than equity, which is rare for a unicorn. It has raised about $1.1 billion in debt. A lot of marquee investors, and there’s, Sequoia, Accel, Greylock, Goldman, IVP. As well as, if you look at public investors like Fidelity, Morgan Stanley, BlackRock, Tiro, all of them have all invested in Dropbox to date.

Rohit 02:55

It’s been quite a while since they raised equity back in Jan of 2014, that was just CDC. And, in fact, if you look at the top 15 large unicorns, Dropbox has in fact raised among the lowest amounts of venture capital till date. In terms of key milestones, it’s been, well, quite impressive, in terms of growth in consumer adoption. Over the past couple of years, enterprise adoption has been impressive as well. We show both of these strengths in this chart. As in, the company reached about 500 million consumers in Q1 of last year. And we think they’re running about 9 to 11 million consumers every month. Which means, by the end of this year, we think it’s these numbers. Not all of them would be active, but that’s still a very large number. 650 million registered users or by end of 2017 seems reasonable to us.

Rohit 04:01

I guess the biggest question before I jump into the big picture risks and the overall positives, why one would invest in Dropbox, or why one should stay away from it, what was interesting to us was talking to investors, talking to people in the ecosystem that the biggest question on people’s minds is can Dropbox avoid a down-round IPO? People are anchoring around what has happened over the last 12 to 18 months with mutual funds that own equity in these companies and how they’re marking their holdings. For example, on our website, you can see all the mutual fund marks since the dawn of time or whenever these companies like Fidelity and Tiro started marking companies like Dropbox or Uber or Palantir to a certain value. We kind of aggregate all of those data points and come up with a valuation. So if you were to log on to your account you will see Dropbox is valued at anywhere between five to seven billion dollars by a lot of these mutual funds. And the most recent private funding round was at $10 billion. So there is a clear discount in-- so we run a basic financial model and there are a lot of ifs here and a lot of assumptions here. Again this is based on publicly available information and assumptions based on top of publicly available information.

Rohit 05:42

So if Dropbox pursues an IPO route, if it goes public in first half of 2018, which according to what we’re seeing in the media seems reasonable to expect, so which is in the next 12 months we should expect Dropbox to be a public company. We’d guess public investors would probably rely on what Dropbox would do in 2019 as investors tend to look one year ahead. So what Dropbox could do in 2019 is what we try to come up with. And we obviously came up with two scenarios. If Dropbox is growing about 20, 25 percent revenues in 2019, if Dropbox has a profitability level of more than 10% EBITDA margins, which also does not seem completely unreasonable given its track record. The company should be able to avoid a down-round IPO. So that’s an upside scenario on this stage. So there is a base scenario where the company should be able to go public around seven to seven and a half billion dollars valuation, which still would be one of the largest IPOs in 2018.

Rohit 06:55

Oh, we have a question. Can you talk about what’s the difference between the base case scenario and the upside scenario? As in there are a lot of assumptions in there. I’m happy to share the detailed assumptions but to oversimplify a little bit, we have we have constructed a model for consumer and enterprise revenues. And for each of those revenue line items we have come up with underlying metrics and growth rates for those metrics. For example, in consumer, you have number of users, the penetration of paid versus free users, and monthly RPU, as in average revenue per user. Similarly, on enterprise side, how many companies are paying Dropbox employees per company and average revenue per user. So there are a lot of puts and takes in there, I agree, but if consumer revenue is growing low teens if enterprise revenue is growing about 50% on the blended basis this company probably grows revenues about 25% or more, which leads us to the upside case. Happy to talk about more details in the underlying assumptions offline.

Rohit 08:10

There are large details in the full report, which is available online. I’ll probably spend a minute on each of these slides, but I would definitely encourage everyone to look at the full report which has more color commentary and more charts around all these things. So first is obviously Dropbox faces a large and growing market opportunity, and also benefits from large self secular tailwinds. So the simple headline here is if it continues to execute well, it should be able to sustain its top line revenue growth over the next five years. Cloud computing, networking, and storage are somewhat, what we call as the pillars of cloud computing. And within that storage is what the industry experts believe is going under a complete renaissance, how people handle storage. Everybody has more memory on their iPhones today, on the laptops, and many other things. So there are clear secular frames in terms of mobility, data growth, and migration to the cloud, which Dropbox should be able to become a direct beneficiary from.

Rohit 09:27

Also one of the most prestigious surveys that have been done in the industry by IDG last year, we ask CIOs, as in Chief Information Officers, of very large companies about what are you going to spend on over the next couple of years? What’s your top priority? The top two priorities are data analytics and data storage. Which makes me more believe that Dropbox and companies like Dropbox should be able to grow, given the secular tailwinds that they have over the next two, three, four, five years. Dropbox is a leading brand among consumers, they would end 2017 with 650 million registered users. We also conducted a survey of American Internet users. We polled about 3,300 people online about what do they use for storage online. And 57% of American Internet users, we think, are registered Dropbox users.

Rohit 10:41

If you look at the other four companies that are around Dropbox, Google, Microsoft, Apple, Amazon, these are massive, massive companies. Each of these companies is probably 30, 40, 50 times larger than Dropbox in terms of valuation. Dropbox is the only decacorn, as in 10-billion dollar company that has publicly announced that they are generating positive cash flow. Which means they are controlling their own destiny. They’re not burning cash, which is very, very rare. It is the only decacorn, earlier this year they announced that they are even positive EBITDA, which also is very rare. In January of this year, they announced that they were the fastest SaaS company to reach a billion dollars of annual record in revenue. On the right side, we thought this chart would be interesting and that is just what we have put together for the Magic Quadrant book published by Gartner over the last four years. And if you can try to look closely, the blue dot on Dropbox has had a pretty nice trend line in terms of how Gartner views it.

Rohit 12:04

Again, lots of curve [inaudible] there, but the basic point is, Dropbox seems to have been executing very well over the last three, four years. Dropbox is a very rare company that has bought B to B and B to C revenue segments. This has rarely been done before, so that’s a risk. They have a direct to consumer offering which is where they started, and over the last two, two and a half years, they have a business-to-business offering. Very few companies have done this successfully over the longer term. Microsoft comes to mind. Many companies either decide at the get-go that they want to pursue just one revenue stream. So, in my opinion, Dropbox benefits from kind of the cost and revenues and synergies associated with say, product development, sales and marketing. Both these revenue streams kind of allow them to and we think that is one of the reasons why they may be closer to profitability in a structural manner than what many other companies in their shoes are.

Rohit 13:13

The management team of Dropbox has been pretty vocal about how millions and millions of consumers will use Dropbox for their personal user are advocates, are evangelists of Dropbox as a product inside their business environments, and which is how Dropbox has been able to penetrate so many businesses fairly quickly over the last two years. In our survey also we saw there was a clear overlap. 8% all Dropbox users, which is about 2,000 Dropbox users we surveyed, 8% of those said that they used both personal as well as enterprise Dropbox, which, again, may feel like a small number but there’s a clear overlap in usage there. Another kind of thing that we thought was an interesting, a strategic initiative from Dropbox over the last couple of years since they started the B to B side of things, was the partner network that they have developed. They categorize partners by use cases for end users. There are partners for IT admins, and again, we believe kind of Dropbox can leverage consumer brand and the partner network to enter new geographies. And they can produce a variable sales and marketing spend.

Rohit 14:44

And I think that the recent milestones that they have declared, in terms of profitability, in terms of cash flow, are a direct outcome of how they have been able to leverage the partner network to kind of land and expand beyond what their sales can uphold. We talk about why Dropbox could be a potential [inaudible] target, so that is also a possibility IPO is not the only potential outcome from here on out. In terms of risks to monitor, of course, for any and every company, there is competition. Dropbox competes on a variety of levels with a variety of players. On the consumer side there are many online storage websites. We survey people. On average, every person on the survey uses three online storage providers. So that’s a very clear issue. On the enterprise side, many big and small companies offer cloud storage and enterprise collaboration tools at some level. As in, I think the more research we did, we are less worried about smaller point solutions. But we’re more worried about what larger tech companies could do, as in Dropboxes in any market are very attractive for these large tech companies. And companies like Microsoft, Google, Amazon, Apple-- I will include Box in there to-- we kind of inserted a cute little quote from the CEO’s box in here that has been-- both CEOs of both Box and Dropbox are pretty vocal about the competition, and, again, in terms of innovation, and in terms of in the [inaudible] that happens here in the Silicon Valley.

Rohit 16:33

But what makes us more worried is about the larger players, Google, Microsoft, Apple, Amazon. Again, they have the brands, they have the money, and they have a lot of other muscle to kind of completely change the economic model for a smaller company like Dropbox. Again, so far Dropbox seems to have controlled its own destiny. Also glass half full interpretation of the competitive landscape from these large four tech companies is Dropbox can become a nice, little token acquisition for any of them. But so far it that hasn’t happened so we wouldn’t be betting on it as much.

Rohit 17:23

Okay. There is unclear profitability scenario here. As in, this may seem a bit counter-intuitive to you as just a couple of minutes back, I was talking about Dropbox reaching profitability over the last 12 months or so. Yeah, we do feel encouraged by those reports. But we still aren’t sure what happens over the longer term. Dropbox’s underlying business is changing from a B to C to a B to B model. And so far, we think the profitability level that Dropbox has been able to achieve has been directly due to organic customer acquisition. They haven’t spent a lot on marketing. Look at how much Box spends. When they went public, they were spending about 25 cents more than how much revenues they were making. As in, for every dollar in revenue, the Box was spending a $1.25 on marketing. And that has come down. Today, they spend the whole 60 cents. Every dollar in revenue they make, Box is spending about 60 cents in marketing. So which makes us wonder that as Dropbox is going from a B to C to a B to B model, what happens to their long-term marketing spend? That is the biggest question mark. We haven’t seen the effect of such a change in business model yet. And that’s why the uncertainty around the long-term economics of Dropbox.

Rohit 18:52

As we see, again, Box has done well over the last 12, 18 months in terms of showing a pathway to profitability. The stock is up 100% as a result of that. And so, again, we don’t think it’s too far outstretch a view that Dropbox would be following a similar pattern even with the shift. So it remains to be seen. The next kind of bigger risk that Dropbox has as an added score, Dropbox’s offering can be viewed as a commodity, as an online storage. Everybody has it. Consumers want free space, more free space. They don’t want to pay for it. We asked this to our survey respondents, more than 60% of people want more free space. People want unlimited storage. People want cheaper unlimited storage. So, again, there has been a price war, which I’ll talk about in the next slide. But the risk as in-- Dropbox has been adding a lot of bells and whistles on the top of its core product, collaboration, photo storage, server change, many other things. But the risk here is it might find it difficult to achieve higher degrees of separation and differentiation without a lot of innovation. So there is a circular argument here. To avoid product being viewed as a commodity, they need to spend more on innovation and R & D, which kind of affects the profitability.

Rohit 20:21

A lot of these risks that I’m talking about are kind of interlinked. And there are a lot of circular arguments being made here so bear with me for a second. In addition to the product being a commodity, Dropbox faces intense price competition. Price is a key decisive factor. We asked, again, in our survey, "How much are you willing to spend? Are you willing to spend at all?" And so on and so forth. So the headline from our survey is about 50% of people will probably spend less than $5 per month for unlimited storage. So that is a very scary proposition if that comes true over the next 12, 18, 24 months given where Dropbox’s consumer pricing stands today. So commodity and pricing, these two go hand in hand and that is something that we’ll track over time. The saving grace here is while the cost per gigabyte continues to decline, as in we have charts in our report showing that the rate of decline has slowed down. As in there are industry experts that believe that Moore’s law is coming to a point where we cannot squeeze out any more kind of price per gigabyte than what is physically possible.

Rohit 21:49

So, again, that may be something that is the glass half full interpretation for a company like Dropbox where we are at a point where we just simply can’t physically reduce the cost per gigabyte. Under the challenge, again, somewhat counter-intuitive, is while Dropbox benefits from B to B and B to Cs revenues-- as I said, not many people have done that successfully over time and Dropbox has a reputation as a consumer player. So it raises concerns about can Dropbox serve the large organizations? We have seen things like these play out in companies like Amazon where although it’s a leader in cloud computing and web services, there are still concerns about whether Amazon web services can help the IT admin on our network number when they wanted to. Same with Google Cloud. Same with Google Drives. So that is a risk. And on the consumers’ side of things, we have, as I said, we’ve done reports on Uber, Airbnb and Pinterest before. And we stacked up user satisfaction rates. The marginally yellow flag that I will point out is Dropbox has slightly lower satisfaction rates among consumers than other unicorns. What do we make of it? The headline is because of pricing, because of storage and other comparative things, there is a structurally lower level of satisfaction rate for anybody who offers service that Dropbox does.

Rohit 23:28

I talked about the survey quite a bit during this presentation. But, again, we have a lot of other slides and other charts in the report. And this is just a flow chart about how we conducted the survey. There were about 3300 people, which I think makes it pretty statistically significant. About 1800 Dropbox registered users via SharesPost have been users of Dropbox as well. So there is that element of adding a layer of enterprise usage. And I talked a few of these things, but kind of the headlines are people want more free space, better pricing, there is a clear overlap between Dropbox personal business users, which is a clear positive and so on and so forth. I already referenced the IQ valuation, but in terms of the valuation stream for private tech companies that we have here at SharesPost, again, you can value private tech companies in many different ways. In case of some companies you have information, in case of some companies you don’t. But as a framework, what we do here are SharesPost, is we look at all the publicly available information. And one of the most important piece of public information that we have is Dropbox is the kind of certificate of corporation that we get access to from the state of Delaware. And reading through this legal document, we construct what we call as a waterfall model, which essentially highlights all the terms and conditions, all the liquidation preferences, all the special rights and privileges that private investors have when venture capital investors invest in a private company.

Rohit 25:24

And then there are-- this model feels static here on this PowerPoint slide, but we have it as a dynamic working model online for more than 150 companies on Sharespost.com. Again, I encourage everyone to log on and play with these dynamic waterfall models. Also there is another model which I do not have here on the PowerPoint is the IPO waterfall model. Again, IPO waterfall models don’t appear as sexy as the M&A models, simply because kind of the theory says that all preferred shares get converted into common shares on the IPO, so the preferences are taken care of before the company goes public. But anyhow, the point being, log on and check them out. The second. Kind of this is a chart straight from the report. And, again, where would companies value or where would Dropbox be valued? Again, we grouped SaaS companies in four buckets. You have large-cap software companies, you have high growth software companies. Bottom left we have mid-cap software companies, and we have companies that trade at a premium. Again, there are different ways of interpreting the same data, but the point is there is a clear correlation between growth and the multiple that people are willing to offer.

Rohit 26:51

Also, there are caveats around profitability or pathway to profitability that these scattered plots do not take into account. But the point is, if Dropbox is growing more the 30% to the top right of every chart, it probably gets a solid revenue multiple below high single digits. That remains to be seen if that’s something that becomes a reality. I talked about mutual fund holdings and their implied valuations. And, again, this is a direct screenshot of our website. As I said, there is a lot more data online. And Fidelity, MFS, Tiro, and many other companies have given valuations to Dropbox anywhere between five to seven billion dollars, as I said. And they have held it there until they get further information. So that’s the biggest question mark. I’m coming to an end to my prepared remarks. I did run through this fairly quickly, and we’ll probably open up for questions.

Rohit 27:58

[inaudible].

Rohit 28:01

Yeah. One broader question is how do you compare Dropbox with Box.com. And, again, these are comparable companies with a different strategic focus. The biggest positive in terms of what Dropbox has going for them is two-fold. One is they have an army of - as the CEO of the company said - they have an army of 600 million users using the product globally. They become evangelists and kind of advocates of the product. And second, because of that, in one way Dropbox has been able to achieve profitability, as I said, over the last six years. Box has not yet turned around the profit. These ones on the top left and top right show an upward trajectory, but they are still in the negative. They would still be in the negative over the next 18 months. I think Dropbox’s scale, Dropbox’s consumer following have led to them being profitable. And that is why one way to look at Dropbox’s valuation is probably a downside scenario could be where Box is trading at.

Rohit 29:24

Another question kind of we get quite often is, how should we handicap the risk reward for Dropbox if a lot of mutual funds are valuing at almost half of what they’re trading at? I believe one of the ways that even the publicly-traded mutual funds are valuing Dropbox is kind of the downside scenario is based on a potential acquisition scenario where a year or two years from now they get acquired, given that they are generating revenues and are cash flow break even perhaps growing at a smaller growth rate. So what’s the worst case scenario? At what levels would they get acquired at? And the upside case scenario, to stay independent and they’re able to successfully able to execute over the next two years and get those high single digit EV or whatever new market brings.

Rohit 30:29

Okay. I think we are approaching at a time which we had scheduled. And we have a couple other questions, but what I would highlight is many of you have requested access to the webinar presentation. We will be sending a follow-up email with a link to the presentation within the next few days. And the recording will be available online. And my contact information is on the screen. And feel free to reach out to me or anybody on the SharesPost sales and marketing team in case you have any follow-up. Again, we will wrap it up today. Thank you for your time today, and thank you for joining in. Goodbye.

CONFLICTS:

This report is being published by SharesPost Financial Corporation, member FINRA/SIPC. 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, LLC is the investment manager of the SharesPost 100 Fund, a Registered Investment Company, and other funds. These entities and funds (hereafter “SharesPost”) does, seeks to do business with, owns and/or seeks to own positions in the companies covered in this research report. Consequently, investors should be aware that SharesPost has a conflict of interest that could affect the objectivity of this report. This report was originally prepared and distributed to institutional and certain private clients of SharesPost Financial Corporation. Recipients who are not market professional 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 service. Registered representatives of SharesPost Financial Corporation, do not (1) advise any member on the merits or advisability 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. 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 such company has endorsed, supports or otherwise participates with SharesPost. Company “thesis” are the opinions of SharesPost and are not recommendations to buy, sell or hold any security of such company. Investors should be aware that the SharesPost 100 Fund (the “Fund”) may or may not have an ownership interest any of the issuers that are discussed in the report at any given point in time. 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 consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus with this and other 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(s) 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 feedback from clients of SharesPost Financial Corporation and other stakeholders in our ecosystem, the quality of such analyst’s research and the analyst’s contribution to the grown 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. SharesPost Financial Corporation and SP Investments Management, LLC 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 and should only be considered 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 and you should complete your own independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or other 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, SharesPost Index, SharesPost Investment Management, SharesPost 100 Fund, and SharesPost 100 List are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.

Contact

For information on research and analysis

Rohit Kulkarni
Managing Director
Private Investment Research Group
(650) 300-5128
Email
CONFLICTS:

This report is being published by SharesPost Financial Corporation, member FINRA/SIPC. 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, LLC is the investment manager of the SharesPost 100 Fund, a Registered Investment Company, and other funds. These entities and funds (hereafter “SharesPost”) does, seeks to do business with, owns and/or seeks to own positions in the companies covered in this research report. Consequently, investors should be aware that SharesPost has a conflict of interest that could affect the objectivity of this report. This report was originally prepared and distributed to institutional and certain private clients of SharesPost Financial Corporation. Recipients who are not market professional 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 service. Registered representatives of SharesPost Financial Corporation, do not (1) advise any member on the merits or advisability 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. 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 such company has endorsed, supports or otherwise participates with SharesPost. Company “thesis” are the opinions of SharesPost and are not recommendations to buy, sell or hold any security of such company. Investors should be aware that the SharesPost 100 Fund (the “Fund”) may or may not have an ownership interest any of the issuers that are discussed in the report at any given point in time. 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 consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus with this and other 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(s) 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 feedback from clients of SharesPost Financial Corporation and other stakeholders in our ecosystem, the quality of such analyst’s research and the analyst’s contribution to the grown 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. SharesPost Financial Corporation and SP Investments Management, LLC 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 and should only be considered 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 and you should complete your own independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or other 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, SharesPost Index, SharesPost Investment Management, SharesPost 100 Fund, and SharesPost 100 List are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.