| | | The holiday season is almost here. And for consumer-facing startups based in the Bay Area, the must-have gift of 2020 is a shiny new IPO.
Momentum has been building all autumn, with highly touted names including Snowflake, Palantir Technologies and Asana all going public in the past couple months. But those deals turn out to be just the prologue to a December surge unlike anything Wall Street has seen since … well, since all the way back in 2019.
Welcome to The Weekend Pitch. I'm Kevin Dowd, and you can reach me at weekend@pitchbook.com. Don't expect a newsletter next Sunday—I will be off to enjoy a rather unusual Thanksgiving. So let's make this one count. A quartet of consumer-focused Silicon Valley unicorns filed for IPOs, which is one of 11 things you need to know from the past week: | | | | | |  | | At long last, Airbnb and CEO Brian Chesky are ready to go public. (Justin Sullivan/Getty Images) | | | 1. A frenzy of filings
The biggest name to submit paperwork this week for a long-awaited leap to Wall Street was Airbnb, setting the stage for a deal that could raise $3 billion at a valuation of some $30 billion. As my colleague James Thorne wrote, Airbnb's filing gave the public its first detailed look at how the pandemic has altered the vacation rental company's financial picture.
The headline numbers are a loss of $697 million on revenue of $2.5 billion through the first nine months of 2020, compared to a $323 million loss on revenue of $3.7 billion during the same stretch last year. The worst damage from COVID-19, though, seems to be in the rearview mirror: Airbnb actually logged a net profit of $219 million in Q3 after losing more than $575 million in Q2.
Airbnb CEO Brian Chesky has long resisted submitting to the burdens that come with being a public company. He was also reluctant to dial back grand ambitions like creating content for TV shows, as Reuters detailed this week. But the pandemic proved to be the event that finally forced his hand. For Chesky, going public may be bittersweet; for the company's longtime employees holding stock options set to expire early next year, there's probably nothing bitter about it.
The S-1 also revealed the size of the stakes acquired by Silver Lake and Sixth Street Partners when the two private equity investors provided Airbnb with much-needed debt and equity financing in April, a round that reportedly valued the company at about $18 billion. Silver Lake now holds 23.5% of Airbnb's Class A shares, with Sixth Street holding another 18.5%. The company's Class B shares, meanwhile, which come with 20 times the voting power, are still concentrated among executives and VCs. Sequoia owns 16.6% of Class B shares, and Founders Fund holds another 5.4%.
Founders Fund is also among the largest private backers of Affirm, another entrant in this week's race from Silicon Valley to Wall Street. Led by PayPal co-founder Max Levchin, the fintech company offers buy-now, pay-later services for a range of consumer products. Just two months ago Affirm raised a $510 million private round.
Affirm revealed a net loss of $112.6 million against $509.6 million in revenue for its fiscal year ended June 30, compared to a $120 million loss on revenue of $264 million a year earlier. That 93% year-over-year jump in revenue certainly creates an attractive growth curve. A startling amount of that cash, though, came from a single source: Purchases from Peloton represented about 28% of Affirm's total revenue during that last fiscal year.
Like Affirm, Wish is a VC-backed San Francisco-based company that helps consumers buy things. And like Affirm, Wish filed for an IPO this week, a little more than a year after it raised a reported $300 million round that valued the company at $11.2 billion.
Wish operates an ecommerce platform not unlike Amazon's, where merchants can list their own products and sell directly to consumers. It's a model that created $1.7 billion in revenue through the first nine months of 2020, although Wish still recorded a net loss of $176 million. Investors DST Global (24.1%), Formation8 (16.1%) and Founders Fund (14.3%)—yes, them again—combine to own more than 50% of Wish's Class A shares, but a dual-class structure means they control less than 12% of its voting power.
That leaves Roblox, the source of this week's final filing, the operator of an online gaming platform for kids that has seen explosive growth in the social-distancing days of the pandemic. The company reported 31.1 million average daily active users through the first nine months of the year, an 82% YoY increase.
That surge in traffic led to a 68% YoY leap in revenue, up to $589 million through the first nine months of the year. But like every other startup on this list, Roblox is still losing money: $206 million through the end of September, compared to $46 million in the same period last year.
In February, shortly before the pandemic arrived in earnest, Andreessen Horowitz led a $150 million investment that valued Roblox at about $4 billion, according to PitchBook data. Altos Ventures (21.3%), Meritech Capital (10.3%) and Index Ventures (9.9%) all own double-digit stakes in the company.
That's four looming IPOs from consumer-facing companies that have combined to raise some $7 billion in venture backing and currently hold a combined valuation north of $36 billion, according to PitchBook data and various reports. And that's only the IPO filings that were submitted in the narrow confines of the past seven days.
Last Friday, DoorDash filed for what will in all likelihood be another massive December offering. Instacart is reportedly planning a potential $30 billion IPO for early next year. And reports emerged this week that Robinhood is preparing a listing of its own for 2021, an event that just might cause some sort of day-trading singularity.
Twelve months ago, we all thought that 2019 would go down in the history books as a year of unprecedented VC-backed IPOs: Uber, Lyft, Pinterest, Zoom Video Communications, Beyond Meat, Slack and Peloton were just some of the names to take the leap. Even if the pipeline was just as packed in 2020, one might have reasonably expected the pandemic to postpone some plans.
But instead, this golden age of unicorn IPOs just keeps going.
2. Intellectual property
Let us shift from IPOs to IP. Taylor Swift's struggles with the private equity industry continued this week, as Shamrock Capital reportedly struck a $300 million deal to acquire the rights to the pop star's first six albums from Ithaca Holdings, a portfolio company of The Carlyle Group. Adam Lewis has more details on the controversial deal. In other music rights news, Round Hill Music Royalty Partners closed a $291 million private equity fund it has already deployed to buy the rights to songs from artists ranging from Black Sabbath to Limp Bizkit.
3. Amazonia
More than two years after a $753 million acquisition of PillPack that presaged such a move, Amazon has formally launched Amazon Pharmacy, a new service that will allow patients to purchase subscription medications on the ubiquitous platform. Two startups that rely on the Amazon ecosystem, meanwhile, raised nine-figure rounds this week: Heyday, which works with founders to acquire and launch ecommerce brands, brought in $175 million, and SellerX, another company that buys and builds Amazon shops, hauled in a reported €100 million (about $119 million) in a massive seed round.
4. Pandemic progress
Promising news on the COVID-19 vaccine front in recent days was accompanied by a VC-backed first: Lucira Health, which raised a $32.5 million venture round earlier this year, became the first company approved by the US Food and Drug Administration to offer an at-home test for the virus. The startup's backers include Eclipse Ventures, DCVC and Y Combinator.
5. Edtech unicorns
Udemy, an online learning company that specializes in massive online open courses, better known as MOOCs, raised $50 million this week at a pre-money valuation of $3.25 billion, with Chinese tech giant Tencent among the investors, Bloomberg reported. Duolingo is a very different kind of edtech company, offering an app that helps users learn new languages. But it also raised new unicorn funding this week, hauling in $35 million at a valuation of $2.4 billion. | |  | | AI-powered bookshelves that scan text and upload it the cloud ... am I onto something here? (Malte Mueller/Getty Images) | | | 6. Market moves
The past week brought a pair of takeovers that might be particularly notable to public investors. Nasdaq, which is best known for operating its eponymous stock exchanges, agreed to pay $2.75 billion to acquire Verafin, which specializes in detecting financial fraud. And Genstar Capital agreed to sell its majority stake in Institutional Shareholder Services, a proxy advisory firm that helps investors navigate shareholder votes, to Deutsche Börse, the European exchange operator, for an equity valuation of nearly $2.3 billion.
7. Fraud fallout
Disgraced German payments provider Wirecard agreed to sell certain tech assets in Europe to financial giant Santander for €100 million, a step toward unwinding a company that entered insolvency in June after some $2 billion went missing. In the VC world, meanwhile, Bessemer Venture Partners led a $125 million investment in Forter, valuing the company, which specializes in preventing ecommerce fraud, at more than $1.3 billion.
8. Fundraising debuts
Overall, it's been a quiet year for first-time fundraisers in the private markets. But it was a noisy week. Teleo Capital closed its inaugural fund on $250 million, while Pike Street Capital, another lower-middle-market private equity firm, wrapped up its first vehicle with $237 million in commitments. The largest debut fund of the week came from SR One, which closed a $500 million venture fund not long after completing its spinout from GlaxoSmithKline.
9. GTCR cashes in
Two healthcare companies backed by Chicago-based private equity firm GTCR each raised more than $1 billion in public offerings late this week. Maravai LifeSciences, which supplies products used in drug development, diagnostics and more, brought in over $1.6 billion in an upsized IPO. And Sotera Health, which specializes in sterilization, lab testing and advisory services, generated some $1.1 billion in proceeds with a listing of its own.
10. Clearlake's collection
It isn't often you see five transactions from one private equity firm in the same week. But Clearlake Capital Group achieved just that. The Los Angeles-area firm completed acquisitions of insurance tech companies Advisen and Zywave, agreed to buy pet food provider WellPet, reached a deal to purchase PrimeSource from Platinum Equity, and struck another agreement to buy nThrive Technology, with PE Hub reporting that final deal is worth more than $1 billion.
11. Treat yourself
This one's personal. Many a Weekend Pitch has been fueled by snack bars from Kind, a New York-based company that, several years ago, was owned by consumer-focused private equity firm VMG Partners. And now it will have a new owner: Mars, the candy company behind M&Ms, Snickers, 3 Musketeers and more, agreed this week to acquire Kind, with The New York Times reporting a $5 billion valuation on the deal.
View the full list online | | | | | | | | | | A message from Launch with GS | | | | Diverse teams drive strong returns | | | Through Launch With GS—an investment strategy grounded in the belief that diverse teams drive strong returns—Goldman Sachs continues to focus on increasing access to capital and facilitating connections for women, Black, Latinx, and other diverse entrepreneurs and investors. Learn more | | | | | | | | |  | | (DrAfter123/Getty Images) | | | | Every fund manager is different. It's an obvious statement. But it also defines one of the biggest problems for LPs and other market participants trying to decide the best place to park their money. Particularly in the often-opaque private markets, investors are eager for better ways to compare the style and performance of firms pursuing a wide array of strategies.
Which is what prompted my astute colleagues on PitchBook's analyst team to create a new framework for quantifying the varying investment approaches of different private-market managers. Allow me to introduce PitchBook Private Manager Style.
How does one go about applying this new framework to, say, private equity firms? What a relevant question! This week, private equity whiz Wylie Fernyhough published a new note of his own that uses this new method to analyze distinct strategies from across the PE landscape. | | | | | |  | | (VectorInspiration/Getty Images) | | | | Multiple states in the US voted to legalize recreational marijuana earlier this month, the latest steps in a stunningly swift shift in public opinion. Coming at the end of a year in which venture funding for cannabis-related startups has plummeted, Alexander Davis writes that the recent votes could help drive a dealmaking rebound.
In the UK, meanwhile, the government is mulling a regulatory change aimed at attracting IPOs from the upper echelons of the tech universe. Dual-class shares have long been a feature (or a bug) of the public markets in the US. Andrew Woodman examines what they could mean for the future of a post-Brexit Britain. | | | | | |  | | (oxygen/Getty Images) | | | | Earlier this month, the SEC released notable changes to its regulations on crowdfunding, resulting in a nearly fivefold increase in the amount of crowdfunding capital a startup can raise in a 12-month span. What does that mean for the private markets?
There is often a tangible difference between the types of startups that raise crowdfunding and those that turn to venture capital. In his latest analyst note, Kyle Stanford examines how the changes could blur that line, pushing some small businesses away from traditional VC.
Other startups won't eschew VC entirely. For some, as Leah Hodgson writes, the SEC's changes could tilt the balance of power, giving founders more options and more leverage in their pursuit of early capital. | | | | | |  | | Well hello there. (Photography by Glenda Borchelt/Getty Images) | | | | A hypothetical: You are a prospective homebuyer on your way to an open house. You can bring one member of the animal kingdom with you to help assess the property—a critter whose natural gifts might provide a different perspective. What's your choice?
I would like to think this is the thought process that led to the creation of Giraffe360, a startup founded in 2016 by Latvian brothers Mikus Opelts and Madars Opelts that's now based in London. The company raised a reported $4.5 million this week to continue funding its main product, a robotic camera that uses lasers and other high-end tech to help real estate agents conduct virtual tours and provide high-resolution images to possible buyers.
That might come in handy these days, with the pandemic making traditional open houses a tall task. Get it? Tall? That's probably a good note to end on. | | | | | | Recommended reads What happens when a police force runs amok? The city of Vallejo, Calif., serves as a terrifying example. [The New Yorker]
Sumit Singh made more than $108 million in his first full year as Chewy CEO. The pandemic has only served to make the business that much more lucrative. [Bloomberg]
Conspiracy theories have always existed. But they seem to be winning a whole lot more converts in 2020. Why? [Vox]
Earlier this year, the illogical became reality: The price of oil dipped below zero. To understand why, one must consider the town of Cushing, Okla. [Institutional Investor]
The idea of decriminalizing all drugs has long been considered a ridiculous one in the US. A recent vote in Oregon could be a sign that times are changing. [The Baffler]
Eight lessons on the rise of the creator economy from the examples of Twitch and Substack. [PM Principles]
If this headline doesn't grab your attention, I don't know what will: "Ponzi Scheme Suspect Uses Underwater Scooter to Flee FBI." [The New York Times]
The Pew Research Center suggests that YouTube is the most widely used social media platform in the US. So how have the company and its CEO, Susan Wojcicki, managed to avoid closer congressional scrutiny? [Wired] | | | | | | Quote of the week "I definitely think there's a greater level of impatience in Silicon Valley, because if you can make the kinds of transformative changes through technology that we have, why can't we do it on this issue that we hold so dear to us? And I think the problem is we're dealing with a societal issue, and people take time to change, and that is not acceptable and that is not an excuse. So we are trying to break through it in every way we can."
—Ruth Porat, CFO of Google and Alphabet, speaking at the DealBook Online Summit about the tech industry's ongoing lack of gender and racial diversity | | | | | | The Weekend Pitch is produced by editor Kevin Dowd.
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