Weekly Update #236: EZ Index Update

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Weekly Update

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Hello Investors,

With one month of 2018 under our belts, we take a quick pulse check on our EZ VC-Backed Company Index.

Overall, shares of recent VC-backed IPOs have gotten off to a slow start in 2018. Through the first month of the year, the EZ VC-Backed Company Index is up 5%; modestly below the S&P 500 equal-weighted index and lagging the tech-heavy NASDAQ-100. Last year’s IPOs have weighed on the EZ Index YTD, given sharp declines in several names including Blue Apron (APRN), Redfin (RDFN), ROKU (ROKU) and StichFix (SFIX). On a positive note, SaaS shares have fared relatively well this year, returning ~9% so far in January. Supportive software valuations would be constructive for the VC-backed IPO environment in 2018, in our view. 14 of the 22 companies we believe could look to complete an offering in 2018 are SaaS companies.

EZ VC-Backed Company Index vs S&P 500 and NASDAQ-100 Equal-Weighted Indices; 2014 - Present

Source: Ycharts and EquityZen Securities

EZ VC-Backed Company Index vs S&P 500 and NASDAQ-100 Equal-Weighted Indices; YTD

Source: Ycharts and EquityZen Securities

 

In other news…

  • Alphabet launched a cybersecurity firm named Chronicle, which uses machine learning and big data to identify threats. Meanwhile, Amazon acquired security startup Sqrrl. We continue to believe cybersecurity will remain a key area of investment focus among large tech firms.
  • Following a recent court ruling, Spotify will now have to pay songwriters 15.1% of revenues earned through its platform, up from 10.5% prior. The new pay structure could have meaningful implications for the Spotify’s timeline to profitability. Management did not comment on the ruling.  
  • Stripe will stop accepting bitcoin payments this Spring. The announcement highlights some of the hurdles we believe may stand in the way of cryptocurrencies becoming widespread payment mechanisms -- namely slow transaction speed, anonymity (given potential for illegal money movement) and volatility.  
  • Tech firms are preparing for the implementation of new privacy rules in the EU, set to take effect May 25. The rules provide for stricter regulation of data collection and removal; non-compliance could cost internet companies as much as 4% of annual revenue. While a win for customer privacy, stricter data regulation will likely entail higher costs. Separately, by restricting data use, the new rules may have implications for AI research. Chinese firms, in particular, have gained material advantage in AI, in part due to the abundance of data within the country and limited privacy regulations.
  • Earlier this month, MapR announced founder and Executive Chairman John Schroeder returned to the helm of the startup as CEO. Matt Mills, an Oracle veteran who joined MapR in 2015 and became CEO in 2016, left the company. The transition may signal that key investors want to focus more on the company’s technological differentiation as it prepares to go public, particularly amid an increasingly crowded “big data” market. Mills was brought on board primarily to spur growth by strengthening the company’s sales force. Separately, the company reported robust growth for its recent fiscal year (ended October 31), with annual subscription billings growth of 66% and a dollar-based net expansion rate of >150%.

And other things we are reading…

Thanks,
Catherine Klinchuch
Finance & Research Lead, EquityZen

 

Funding Rounds Since Last Week

Invest in Katerra
Katerra - SoftBank leads $865M round into Katerra, a startup that manufactures buildings
Invest in Snowflake Computing
Snowflake Computing - Another huge round for Snowflake: Bob Muglia’s database company raises $263M valued at $1.5B
Invest in Privateer Holdings
Privateer Holdings - Pot PE firm Privateer pulls in $100M

Invest in Ripple Foods
Ripple Foods - Ripple Foods Secures $65m in Series C Funding
Invest in Sun Basket
Sun Basket - Sun Basket hits $275 million run rate and raises $57.8 million to fuel meal delivery expansion
Invest in MATRIXX Software
MATRIXX Software - Telco Billing Company Matrixx Raises $40 Million in Series C

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