EquityZen's Blog On Startups and Their Economics

Dollar Shave Club,, and Nutanix: Paths to Exit

Ketan Bhalla | September 22, 2016

We recently published three new infographics regarding the exits of Dollar Shave Club (acquired by Unilever), (acquired by Walmart), and Nutanix (recently set the terms and price for their IPO).   Take a look to see what these events mean for the major investors of the company - you might be surprised by some of the outcomes.

We regularly publish these infographics to help illustrate the impact of funding rounds for early investors in an effort to "demystify" startup funding.

Dollar Shave Club

Unilever agreed to buy Dollar Shave Club for $1 billion in July of this year. According to Unilever , part of the reason they bought the company was for their "unique consumer and data insights" and because they believed Dollar Shave Club was the "category leader in its direct-to-consumer space".  Forerunner Ventures, who lead the company's seed round, will realize a 49.7x return when the deal official closes.  See full infographic here . was acquired by Walmart for over $3 billion.  The deal officially closed this past Monday - Doug McMillon, President and CEO of Walmart, announced the official closing via a blog post on the company's website.  The acquisition resulted in a 9.2x return for investors in Jet's Series A round, including New Enterprise Associates which acted as the lead investor in the round.  See full infographic here .


Nutanix officially priced their IPO on Monday, setting a range of $11 to $13.  At the midpoint of the range, the $1.64 billion valuation at IPO would be slightly lower than the valuation of the company in August 2014, when they last raised funding.  Assuming the midpoint of the pricing range, the Series D investors would recognize a 2.5x return on their investment at IPO.  See full infographic here .

Announcing EquityZen 2.0

Ketan Bhalla | September 08, 2016

The team at EquityZen has been hard at work over the past few months working on a slew of product features and improvements to further bolster the customer experience for all of our clients.  These features have ranged from small improvements to major product releases. We are excited to highlight some of the most impactful changes here.

EZ Advantage

Arguably our most exciting new feature is a tool that allows users to search across an entire universe of private companies to conduct their own due diligence.  We’ve made it easy (or should I say “EZ”?) to filter the universe by Sector, VC Investors, Total Funding, and even the age of the company.  Want to learn more about a few three-year-old companies backed by Khosla Ventures in the gaming industry?  Head over to EZ Advantage and apply your filtering criteria.  After selecting a few companies from the filtered results, you can compare their important metrics side-by-side, giving you quick access to key details about the companies that meet your criteria.

Support for multiple investment accounts

We have a lot of clients that want to complete transactions across multiple entities, such as a personal account and a trust that has been set up for their beneficiaries.  Previously, the process for doing this was a bit tedious – our clients had to set up separate accounts with limited connectivity between them.  We’ve drastically improved upon this feature – you can now easily make investments across multiple accounts from a single location and receive aggregated reporting on your holdings across multiple entities.  It makes it much easier to complete transactions and also gives you a full view of your investments across multiple user profiles. Financial Advisors with investment discretion on behalf of their clients should also find this useful.

Personalized News Updates

One of the things we strive to do is provide prompt updates on any companies in which you have either expressed interest or made an investment.  We’ve created a new section on the EquityZen platform called “ My News ”, which gives you personalized updates on such companies.  It’s easy to search for specific company news or browse all the recent news related to companies on your “ Watchlist ” (see next section) without needing to dig through piles of unread e-mails in your inbox.


We majorly overhauled the “ Watchlist ”, which is a central location for you to manage which companies you are interested in.  Once you express interest in a specific company, we will automatically add it to the “ My Watchlist ” section of your account.  We’ve given you the ability to give us more information related to your interest, including whether or not you are looking to transact at a specific valuation.  It’s also easy to see which companies are now accepting investments on the EquityZen platform, allowing you to view additional information related to the opportunity quickly and efficiently.  Not interested in a company anymore?  Remove it from your Watchlist and we won’t provide updates to you anymore.

Document Library

Trying to look for all the documents you’ve ever signed related to your transactions?  Need them before tax season comes around again?  We figured.  We have always given you a central repository of documents related to your transactions within your profile, but we’ve made it even easier now.  Everything is consolidated in one location called “ My Documents ”, so you don’t need to look for them on a specific transaction-by-transaction basis.

Navigation Changes

We’ve made it easier to access some of the most important pages on our platform, including updates about your investments and the vast amount of market research that we have produced and curated.  We eliminated redundant links and simplified the overall navigation for all users.

We hope you are as excited as we are about some of these new features and encourage you to give us feedback on our investment platform.  We are constantly trying to improve upon the way that private market transactions are completed, and believe we have come a long way in a short amount of time.

A special shout-out to our development team for their hard work in building, iterating, and releasing all of these great new features.


Six Months Later: The Pre-IPO Investment Opportunity in an Up Market

Kaylock Yam | September 01, 2016

Key Takeaways:

  • Pre-IPO investments can be a core part of the growth equity allocation of your portfolio in all market environments
  • Recent indicators support the case for considering adding pre-IPO investments today following the upward movement of public equity markets over the past six months

You wouldn't have predicted this six months ago.

On February 18, we published a post titled " The Pre-IPO Investing Opportunity in a Down Market. " The S&P 500 and NASDAQ Composite were fresh off declines of over -7% and -11%, respectively, to start 2016. The stock prices of certain public tech companies had plummeted after poor earnings announcements. Where was a U.S. equity investor to go?

Chart 1: S&P 500 Index and NASDAQ Composite
(Feb 16, 2016 - August 31, 2016)

Source: Google Finance

Since the week of our post, public equity markets in the U.S. have rallied (Chart 1), and the tech sector has performed well. The lesson? When making long-term investment decisions, past performance, especially that of the recent past, of an asset class or sector is not necessarily indicative of future results.

Invest. Or invest not.

Investing is filled with over-simplified advice, one of the most long-standing examples being that market timing doesn’t work. While there is a class of investors and traders that would argue against that belief, the fact remains that making an investment is often more important than when you make the investment. This can be true in public equity markets and certainly applies in private markets.

In February, we wrote about pre-IPO investments as a way to diversify your investment portfolio (see our post “ Why Alternatives Should Be Part of Your Investment Portfolio ”). How should you think of pre-IPO investments after a period of upward movement in public markets?

Investing for Growth

Pre-IPO investing is first and foremost a growth investment.

It’s been widely reported that market returns are shifting from public markets to private markets. Companies are staying private longer, and names like Uber ($63B), AirBnB ($30B), and Pinterest ($11B) are generating value for their private investors and raising “quasi-IPO’s” – $100M+ private funding rounds. 1

Chart 2: U.S. VC-Backed Tech IPOs vs. Private Tech IPOs

Source: CB Insights

One way to capture this upside potential, therefore, is to allocate to the private markets.

With an eye to the future, here are a few indicators supporting the case for pre-IPO investing as part of the growth allocation in your portfolio today:

1. Strong Tech Earnings
Technology was the bright spot in an otherwise lackluster second-quarter earnings season and is currently the standout sector showing promising third-quarter expectations, particularly on the heels of strong performance reports from Alphabet (Google), Facebook, and others.  While strong earnings from specific public companies does not necessarily mean that private companies will perform similarly, these are the companies in whose footsteps current private companies seek to follow.

2. Uptick in M&A
Global tech M&A revenue has reached $1.9 billion this year, according to Dealogic. In the past few weeks alone, activity has picked up significantly – both public and private companies are getting scooped up in deals like Verizon-Yahoo, Didi-Uber, Tesla-SolarCity, Walmart-Jet, and Unilever-Dollar Shave Club. Buyers are out there, which is a good sign for growth-oriented investors.

3. Multiple Expansion
Public investors have shown they are willing to pay more per dollar of revenue (or dollar of earnings) for tech stocks. 2 This has positive effects on private tech companies and their prospects of commanding higher valuations in any type of near-term exit (acquisition or IPO). Twilio, which went public in June at a revenue multiple of 6.4 and now trades significantly above its $15 per share IPO price, 3 is an extreme example.

Traditionally, investors have turned to assets like foreign stocks and real estate for growth. Given current uncertainties in global markets and property values, pre-IPO investments deserve a look.

3. Revenue multiple based on company valuation of $1.23 billion at $15 per share and $193 million in trailing-12-month revenue as of March 31, 2016. See:


Planning Your Own Funeral: Why FinTech Firms Must Prepare for the Worst

Sean Troy | August 10, 2016

As humans, we are programmed to “hope for the best but plan for the worst,” a philosophy that is often evident in actions we take throughout our lives. Working professionals, even those with healthy incomes, set up savings accounts to create a financial safeguard against loss of employment. Midwestern families build underground shelters to protect their families from tornadoes. Parents purchase cars with built-in airbags, so that their children are protected in case the unthinkable happens. We plan for the worst not to buy a license to act recklessly, but rather to take care of those who depend on us during extreme times.

It is just as important for companies to take similar measures to protect against unfortunate, yet entirely conceivable disasters. This planning is especially crucial for startups. As Forbes has kindly reminded its readers, 90% of startups fail . One of its advised conditions for creating a successful startup: design a product that is “perfect for the market”. Certainly no easy task. What happens in the end if a product isn’t quite…perfect? What happens if that 90% becomes 100%? All of a sudden, customers who had depended on the company’s services would be left without a safety net.

A mantra frequently heard from company management is “our customers come first!” Yet, those same customers, individuals and businesses alike, are too often left in the dark when a firm closes shop. Companies should acknowledge the possibility of their demise and have contingencies in place for the sake of its customers. Firms that work with people’s money or personal information have an additional moral, if not fiduciary, responsibility to protect it. It is one thing if you suddenly cannot play Pokemon Go or listen to your favorite song on your music app, but it is a completely different thing altogether to be unable to withdraw your well-earned money from your online investment platform. Yet, instances of such businesses leaving their customers high and dry after going insolvent or filing for bankruptcy are far too common.

Let’s consider Nirvanix, the cloud storage provider who filed for bankruptcy in the fall of 2013. Following several successful funding rounds, the company, seemingly out of the blue, announced that it was shutting down operations, giving customers just two short weeks to recover their stored data ( Infoworld, “Cloud Storage Provider Nirvanix is Closing its Doors "). Two weeks. If you stored your kids’ photos on Nirvanix and were on vacation during those two weeks, tough luck. You can bet those customers will think twice about which data storage provider they give their personal information to in the future; and a written insolvency plan will be one of the first things they check for.

Another example affecting individuals and businesses is that of Zirtual, the virtual assistant service provider. Zirtual is still alive, but only after an interesting (to say the least) week late last summer. On August 10th of 2015, Maren Kate Donovan, the company’s founder and CEO, announced that Zirtual would cease operations due to an excessive cash burn. It would terminate its employees and cut off its service to loyal customers. Luckily, a day later, Donovan announced that would salvage Zirtual, allowing it to continue operations the following week (, “Zirtual: What Happened and What’s Next” ). But what if there had been no, no white knight to save the company at the last second? All customers and enterprise clients would have been left on their own.

A common theme evident in each of these, and countless other narratives, is that customers suffer when companies fold without a proper transition. While it is incredibly difficult to generate product awareness and publicity, customer trust is even more challenging to build. Startup founders that make a concerted effort to demonstrate that their customers’ needs come first will find it far easier to earn that trust.

The need for good planning for extreme events is one of the biggest takeaways from the global financial crisis of 2008-09, the worst of the last 80 years. Customer assets evaporated because large banks did not have a robust contingency plan in place for a chain of seemingly unlikely events. Startups, with unfavorable odds of survival, have all the more incentive to consider business continuity as a core customer service they must offer.

Caveat emptor is not good enough. Today, anyone that operates a business that handles customer money should publicly state what happens to that money if the business does not survive. How will customers’ assets be accessible and protected in the event of insolvency?

We at EquityZen, a marketplace for private investments, believe that FinTech firms, especially those managing their customers’ money, must ensure that those funds are completely secure no matter what. We strive to put customer needs first. In the FAQ portion of our website, we candidly face the prospect of our own mortality, addressing what happens in the unlikely scenario that “something happens to EquityZen?” before detailing a prepared structure of a back-up manager who “would ensure orderly administration of the fund and distribution of its assets” ( ).

Image result for tom brady and jimmy garoppolo
Will the Patriots' "backup plan" help the team survive Tom Brady's suspension?

If you were an investor or shareholder, wouldn’t you feel more comfortable knowing that the organization with whom you had entrusted your capital had existing measures in place to keep it secure even in the unlikely scenario of something happening to the company? I fly a lot and while I have never used the floatation device under my seat, I sure am glad airlines put them there.

FinTech founders need not curtail their optimism or compromise their vision, but instead, must accept that as leaders, they have an added level of responsibility to their customers. Against all their natural instincts, they must prepare for mortality, so that early adopter customers are not penalized when something goes wrong. Young companies must have a contingency plan in place to protect customers and their assets. We are in an age where cybersecurity breaches (see last summer’s Ashley Madison hack ) and regulatory probes against high-profile CEOs (see Elizabeth Holmes, Theranos ) are almost commonplace. Customer trust is at a premium. In a world where 90% of start-ups fail, those that neglect to recognize that fact will quickly see their 10% chance of success turn to zero.


Q&A: Serengeti of Private Markets with Ben Narasin of Canvas Ventures

Atish Davda | July 21, 2016

EquityZen is continuing its Q&A series with Ben Narasin of Canvas Ventures . You can catch the previous edition covering the state of private markets at the end of Q1 of this year with 500Startups’ Dave McClure . Here at EquityZen, we closely follow private markets and help shed light on opportunities available at various points of the market cycle. You can follow us on Twitter @EquityZen for more real time updates.

Ben is a seasoned entrepreneur and prolific early stage investor. He took one of his earlier ventures public in 1999, and since has focused on identifying and investing in early stage companies both, as an angel as well as an institutional investor, first with Triple Point Ventures and now as General Partner at Canvas Ventures.

Public and private equity markets in technology and digital healthcare have enjoyed a strong bull run over the past several years. However, with virtually no IPOs in the first half of 2016, they have been seemingly getting stuck in what seems like a limbo over the past six months. So, I spoke with Ben towards the end of June to discuss private markets, specifically the venture capital and growth equity kind, and asked him to help lift the fog, and share ways to find opportunities amidst the haze. A synopsis of our discussion follows.


Why Alternatives Should Be Part of Your Investment Portfolio

Ketan Bhalla | July 07, 2016

When individuals think of their investment portfolio, they tend to think of more traditional asset classes: fixed income (bonds) and equities (stocks).   Historically, individual investors have not had easy access to alternative asset classes, such as hedge funds, real estate, private equity or venture capital.  However, with the emergence of online investment platforms and the rapid advancement in the fintech industry, many alternative asset classes are now available to accredited investors at manageable minimums, allowing them to further diversify and potentially enhance their investment portfolio.  The next obvious question is: why invest in alternative asset classes in the first place?

Portfolio Diversification – what does it all mean?

By diversifying your portfolio across different types of investments, you hope to primarily do two things: a) protect yourself during market downturns and b) participate in positive markets while taking less overall risk.  Said differently, diversification should lead to lower volatility for your overall investment portfolio.  Lower volatility is important because, all else being equal, it allows your portfolio to compound more quickly over time and could have a significant impact on the cumulative return of your portfolio.  Frankly, it also helps from a “peace of mind” perspective – not having your investments rise and fall rapidly in conjunction with major market swings may give you more conviction to stick with your investment strategy over the long term.  Think about it in the context of having “many eggs in many baskets”.

One of the more traditional benchmarks for a “diversified” portfolio is what is known as the “60 / 40 Portfolio”.  This means that 60% of your portfolio is invested in stocks and 40% of your portfolio is invested in fixed income.  Of the two asset classes, equities are considered “riskier” (in part due to higher historical volatility) but also present the most upside potential.  Fixed income, on the other hand, is considered less risky and tends to provide a more stable return profile.  Obviously this is just a baseline – younger investors who have a longer investment horizon tend to be more heavily invested in equities since they can withstand additional risk in order to try and achieve higher growth.  Older investors, on the other hand, tend to be more invested in fixed income since their investment horizon is shorter. 1

Got it – but why add other alternative asset classes?

Adding alternatives can provide diversification benefits because they tend to have a low correlation to traditional asset classes and also may have lower volatility than equities.  Both of these features may make them attractive portfolio additions, but need to be balanced with the fact that alternatives also tend to give you less liquidity than traditional asset classes.  Unlike stocks or bonds, you generally cannot buy and sell alternatives freely on a publicly traded (or even privately traded) market.  This liquidity characteristic is why alternatives tend to be a smaller allocation for individuals in a “modern portfolio” compared to stocks and bonds.

It should also be noted that there is no standard definition for “alternatives” – many people define the asset class differently.  Personally, I like BlackRock’s definition the most: “core diversifiers, sources of potential return and investments that provide risk exposures that, by their very nature, have a low correlation to something else in an investor’s portfolio.” 2

These characteristics are visualized nicely in this chart by J.P. Morgan 3 :

This chart is your typical “efficient frontier” which plots risk (volatility) on the x-axis against return on the y-axis.  Here you can see that adding an allocation to alternative investment strategies has historically increased returns without an increase in volatility, which is precisely what you would want in an investment.

Another thing to note is that institutional investors, who are often viewed as the “smart money”, have been using alternatives for quite some time to help diversify their investment portfolio and attempt to enhance their returns.  In fact, according to the 2015 NACUBO-Commonfund Study of Endowments, endowments allocated 29% of their total investment portfolio to alternative strategies on average. 4

Cool.  Can private company investments be considered “alternatives”?

In our mind, private company investments are a core piece of the overall “alternatives” landscape because they fit the characteristics defined above.  Unfortunately there is not a specific pre-IPO company index out there, but we can use a few widely accepted indices as a proxy to illustrate the impact of adding private companies to an investment portfolio.

Specifically, if you look at the Cambridge Associates Venture Capital Fund Index, you can see that it has a 0.42 correlation to the S&P 500, calculated quarterly, since Q1 1990 5 and therefore should act as an investment portfolio diversifier.  For the uninitiated, a correlation of 1.0 would be perfect correlation (i.e. the asset classes move in lockstep with one another).

In addition, if you look even more specifically at the U.S. Venture Capital - Late & Expansion Stage Index, you can see that it has generated excess returns of 2.5%, 0.41%, and 5.5% over the S&P 500 over the past 3, 5 and 10 year periods, and has actually outperformed the S&P 500 over almost every period over the last 30 years. 6

While these indices are not a direct proxy for late stage, pre-IPO companies, we do believe that they carry similar characteristics and we believe that allocating a portion of your public equity exposure to private companies makes sense for diversification purposes.  However it should be noted that investing in private companies does involve a fair amount of risk and, like any other investment, investors should be cautious of making an outsized investment in a single company.  Further, no individual security can be expected to behave as the sum of the components of an index and individual securities may have no performance correlation with an index.


We believe that alternatives do have a place in individual investor portfolios because they provide a source of return diversification that is difficult to replicate with traditional asset classes.  With the emergence of online investment platforms that offer access to alternative investments at reasonable minimums, individuals now have the ability to invest in asset classes that were previously accessible only to the largest endowments and pension plans.  More individual investors should take advantage of the opportunity to allocate a portion of their portfolio to these types of investments.

1 Source: Fidelity. .  Accessed on June 6th, 2016.

2 Source: BlackRock.  “The New Diversification: Open Your Eyes to Alternatives, A Conversation with Dr. Christopher Geczy”, Page 8. .  Accessed on June 6th, 2016.

3 Source: J.P. Morgan Asset Management.  U.S. Guide to the Markets, Q2 2016, Page 55. .  Accessed on June 6th, 2016.

4 Source: National Association of College University Business Officers.  2015 NACUBO-Commonfund Study of Endowments.  “Asset Allocations for U.S. College and University Endowments and Affiliated Foundations, FY2015”, .  Accessed on June 7th, 2016.

5 Source: Cambridge Associates and Standard and Poor’s.  Venture Capital returns sourced from Cambridge Associates’ “U.S. Venture Capital Index and Selected Benchmark Statistics”, Page 5. .  Quarterly S&P 500 Index returns were calculated based on monthly total return figures provided by Standard and Poor’s. .  Correlation and quarterly S&P 500 Index returns calculated by EquityZen.  Both links accessed on June 7th, 2016. Past performance is not indicative of future results.  It is not possible to invest directly in an index .

6 Source: Cambridge Associates and Standard and Poor’s.  Venture Capital returns sourced from Cambridge Associates’ “U.S. Venture Capital Index and Selected Benchmark Statistics”, Page 3. .  Accessed on June 7th, 2016.

Selling in Private Secondary Markets

Sean Troy | May 19, 2016

Imagine that it is July 31st, 2015 and you are an investor who just purchased $1 million of Valeant Pharmaceuticals (VRX) stock.  Fast-forward May 17, 2016.  That $1 million investment would have plummeted in value to $123,416.  If you had instead chosen to invest $1 million in XLV, the S&P healthcare ETF, you would have $905,471.  Not necessarily a positive return in value. But not a complete wipe out of it either.


EquityZen Wins at the Fintech Innovation Awards

Danielle Sandler | May 04, 2016

It is my pleasure to announce EquityZen as the 2016 recipient of the global Innovation in Wealth, Asset and Investment Management award at FinTech Innovation Awards held in London on April 13, 2016! There was an extensive list of companies, culled worldwide, considered and nominated for the award. We are proud to be among such innovative and impressive companies.


Q&A: Dave McClure of 500 Startups on the State of Private Markets

Atish Davda | April 20, 2016

Looking back at the first quarter of 2016, the public equity markets have been defined by a fair amount of volatility, and have followed a “V” shape, ending the quarter close to the levels at which is started. At the same time, mid-stage private technology companies are focusing on “revenue and profitability” instead of just “growth and capital raising”. Amidst all of the reasonable caution, there is opportunity.
S&P500 through March 2016, source: Google Finance

In order to investigate these recent market trends, and in order to try and understand what may lie ahead, EquityZen is starting a series of interviews with informed professionals in the private, venture-backed industry.

Profiling the Average Tech Company at IPO

Alex Wang | April 13, 2016

In August 2015, we published “But When Will They Go Public? A Profile of the Average Company at IPO” , in which we analyzed 71 venture-backed tech companies that went public in the US between January 2013 and June 2015. As a result, we arrived at the profile below of a “typical” tech company at IPO:
Exhibit: A typical tech company at IPO
Source: Capital IQ, CrunchBase, Company S-1s, EquityZen
Unfortunately 2015 was not a great year for tech IPOs--in fact it was the worst year since the Financial Crisis , with only 28 technology companies entering the US public markets. Have things changed since July 2015, when we last crunched the numbers? In this post, we analyze the 11 (that’s right, just 11) information technology companies that have gone public in the US since July 2015.


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