Weekly Update #208: Examining Redfin in 2014 (Series G) and in 2017 (IPO)
EquityZen has produced these weekly updates for secondary investors, shareholders and company representatives.
If you find this useful, subscribe to our weekly newsletter!
In order to view EquityZen's Investment Offerings, you must be an Accredited Investor.
Examining Redfin in 2014 (Series G) and in 2017 (IPO)
S-1s are fun. If you recall (Week #181: WTF is an S-1), they typically offer the public their first full dive into the company’s financials.
I’m always curious to look at a pre-IPO tech company’s “story” at the time of their last private capital raise. Redfin, a real estate technology company planning to IPO later this month, had raised $71M in December 2014, at an $840M post-money valuation.
As the round closed in December 2014, Redfin was able to show institutional investors, with a high level of certainty, what their 2014 numbers would look like. As per the S-1, the company generated $125M in 2014 revenue and had Net Income of -$25M:
(Source of Graphic: Mahesh VC)
This implies a revenue multiple of 6.7x ($840M valuation divided by $125M of '14 revenue) that institutional investors were willing to pay in 2014. How does that compare to the (yet-to-be-finalized) IPO valuation in 2017? Let's go back to the infographic:
Redfin's 2016 revenue was $267M, which would suggest a 3.9x revenue multiple, quite a drop from Redfin's 6.7x multiple in 2014. Why the change of heart? It could be a few reasons:
So what does this mean for you, the pre-IPO investor, as you evaluate secondary opportunities? We recommend that investors look at pre-IPO companies through the lens of what valuation the company may command in the public markets in the future. Redfin helps paint a picture of the evolution from a privately held, growth technology company, into a publicly traded entity as it heads towards its IPO.
Funding Rounds Since Last Week
To learn more about whether you're eligible, typical investment size, company valuation, and share price, request access here.