Methodology

Index Eligibility Requirements

Subject to the exclusions described below, the companies included in the SharesPost Private Growth Index will include all private companies known to the Publisher to:

  1. have been incorporated in the U.S at least three years prior to the most recent index rebalancing;
  2. be predominantly technology-driven or technology-enabled businesses as determined by the Publisher; and
  3. have raised either:
    1. $200 million or more in equity capital from one or more "Followed Institutional Investors" - the list of Followed Institutional Investors may be updated from time to time; or
    2. at least $100 million in equity capital in a single round of financing.

The following companies are explicitly excluded from the Index:

  1. companies with a ratio of debt to equity capital exceeding 25 percent; and
  2. companies with two or fewer rounds of private equity or venture capital financing raised.

Finally, the Publisher reserves the right to exclude any company from the Index that it believes would undermine the integrity of the Index and its effectiveness in representing the private growth asset class.

A list of the companies currently comprising the Index is always available from the SharesPost website at here.

Index Calculation

The Index value is calculated based on a proprietary, equal-weighted index methodology developed by the Publisher to measure movement in the valuations of VC-backed private growth companies.

As an equal-weighted index, the SharesPost Private Growth Index ascribes an equal share of the Index Value to each Index Constituent. While the Index is thus more insulated from volatility among the largest constituents, fluctuations in the value of smaller-cap Index Constituents will more heavily influence the Index than if a market-weighted calculation were used.

The Index is calculated on a price return basis. The current Index level is calculated by dividing the aggregate implied enterprise value of all Index Constituents by an Index Divisor. The implied enterprise value of each Index Constituent is calculated by application of a proprietary “waterfall” model to the Index Data, defined below. Waterfall models are constructed by the Publisher based on each Index Constituent’s publicly filed documents, and are used to infer enterprise values from individual transactions or valuation marks in particular share classes (e.g., Common Stock, Series A Preferred Stock, etc.). The Divisor is based on the number of companies included in the Index as of the most recent rebalancing and is updated as a result of corporate actions (e.g., bankruptcy, divestiture, or initial public offering) that change the composition of the Index Constituents. The Index was set to a base of 100.00 at its initiation on January 1, 2017.

Each publication of the Index will include a “distribution” line item to ensure that introduction of a new company or removal of a company from the Index due to a corporate action does not disproportionately affect the existing weightings of the index. Any new company will be introduced with a starting index value of 100, but we will add the difference between the value of the Index prior to introduction of the new company and 100 (i.e., Index value minus 100) to the distribution line. When a company is removed from the Index, we will add the difference between its contribution to the Index and the value of the Index prior to the company’s removal to the distribution line. The sum total values of all Index Constituents will be added to the distribution line to determine the gross sum of the Index (numerator). See below for an example Index distribution calculation.

We note that the price return measure reflects only implied capital appreciation, while any income generated by the assets in the Index, in the form of interest and dividends or other distributions, is ignored. This approach contrasts with a total return approach to index construction, which would take into account the income generated in the portfolio. We have chosen the price return measure because private technology growth companies typically do not pay shareholders interest or dividends or make other distributions.

Users of the Index should note that the Publisher must exercise some judgment in its collection of the Index Data and application of the Index formula to the data.. For example, the proprietary waterfalls used to extrapolate the enterprise value of Index companies require the Publisher to make certain assumptions about transaction structures and terms. The Publisher seeks to be as consistent and diligent as possible in the exercise of such judgment, and works to ensure that personnel responsible for exercising judgment in the calculation of the Index have the requisite expertise. Further, the Publisher regularly evaluates the appropriateness and accuracy of prior judgments when new Index Data becomes available.

Whitepaper

SharesPost Private Growth Index White Paper

The SharesPost Private Growth Index is designed to measure the performance of VC-backed, U.S.-based, private growth companies. The Index is composed of a broad array companies, spanning multiple technology-driven sectors including Consumer Internet, Enterprise Software, Energy, Healthcare, and Financial Services.
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The SharesPost Private Growth Index Webinar
Webinar

The SharesPost Private Growth Index Webinar

If you missed our recent webinar, here’s your opportunity to join SharesPost CEO & Founder, Greg Brogger and Rohit Kulkarni, Managing Director, SharesPost Research, for an overview of the new SharesPost Private Growth Index.
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