Weekly Update #195: Staying Private vs Going Public: Both Can Work

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Hello Investors,

Staying Private vs Going Public: Both Can Work

A concoction of news in the tech investment space allows us to revisit a heavily debated topic: should companies stay private or go public?

On the public side, big-data company Cloudera set the initial range of its IPO at $12-14 per share, an implied valuation of $1.8 billion at the high end. This is a far cry from Cloudera's $4.1 billion valuation in 2014, when it took money from Intel as a lead investor. 

On the private side, home-remodeling marketplace Houzz is reportedly looking to raise $500 million in private capital at a $5 billion valuation. This would effectively double the company's valuation, previously $2.3 billion when Sequoia led a $165 million round in 2014.

And lastly, we have reports out that Bonobos, a privately-held men's online retail startup, is in talks to be acquired by Walmart for $300 million. This is roughly in line with the company's valuation when they raised $55 million.

Should we chastise Cloudera for dropping 50% in value in 2 years? Should we applaud Houzz for doubling? And should we have some sort of mixed reaction that Andy Dunn has led his company to an acquisition value that will likely not generate much of a return for his recent investors?

I'd argue that these data points serve as a reminder that public and private markets are both working. Cloudera raised money in 2014 when revenue multiples of their public peers were closer to 10x, vs the current environment of 5x. And Houzz may have some onerous, investor-frendly terms that come with that glittery $5 billion price tag. Lastly, a $300 million price-tag for Bonobos is a marvelous exit for the bulk of its employees and investors (and its latest group of backers may be happy to get their money back; Bonobos was certainly able to test a number of business development strategies with the capital, and it looks like those tests will not cost investors a dime).

In other news...


Phil Haslett
Founder + Head of Investments, EquityZen


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