Weekly Update #254: A Tale of Two Exits

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Hello Investors,

Two tech exits were announced in the past week:


  • Yesterday, Microsoft announced it would acquire code repository GitHub in a $7.5B stock-for-stock deal. The acquisition price marks a significant increase from the $2.2B implied valuation awarded to the startup in its 2015 funding round. GitHub raised a total of ~$350M of outside funding prior to Microsoft’s offer -- demonstrating the potential capital-efficiency of developer-focused business models. Atlassian (NASDAQ: “TEAM”), another developer-focused tool, also effectively bootstrapped its business to a $4B IPO valuation, raising only $62M of outside funding before going public. Of course, less outside funding also means less dilution and a greater windfall for founders and other common shareholders. In Atlassian and GitHub’s case, common shareholders controlled just under 80% of the company prior to exit. By comparison, this number can be 40-45% for the typical startup (with founders accounting for 10-20% of this).

Common Shareholder Ownership Prior to Exit

Source: Company Data, AVC and EquityZen estimates


  • Domo filed an S-1 on Friday, with plans to list on the NASDAQ under the ticker “DOMO”. Pricing is TBA. As the startup previously had extremely limited disclosure, the filing offers the first public glimpse into its performance. In our view, while Domo has shown solid revenue growth, we believe investors will be more focused on the startup’s gaping operating losses, with margins well below other SaaS peers in the periods before IPO. Further, its cash position appears weak, with just $72M sitting on the balance sheet currently and an average quarterly cash burn of roughly $35M over the last year. Based on our initial estimate, we believe the company could be valued at ~$1.0B versus the $2.2B implied valuation from its last private funding round. Stay tuned for a more detailed analysis of the S-1.

Operating Margins in Quarters Leading up to IPO: Domo vs. Peers

Source: Company filings and EquityZen estimates


Domo Valuation Analysis

Source: Company filings, Ycharts and EquityZen estimates

 

Other items we are reading:
 

Thanks,
Catherine Klinchuch 
Finance & Research Lead, EquityZen

 

FUNDING ROUNDS SINCE LAST WEEK

Invest in Wikia 
Wikia - [Wikia, Parent Company Of Fandom, Raises $106 Million In New Equity Funding]
Invest in Signifyd 
Signifyd - [Signifyd Secures $100M in Series D Funding, Opens First International Office in Barcelona to Scale the European Market]
Invest in Chime 
Chime - [No-fees mobile bank Chime raises $70M Series C, valuing its business at $500M]
Invest in BlueVine 
BlueVine - [BlueVine raises $60 million to give small businesses access to working capital]
Invest in Marqeta 
Marqeta - [Marqeta raised $45M led by Iconiq for payment card processing technology, reportedly at a $545M valuation]
Invest in Protean Electric 
Protean Electric - [Protean Electric Secures $40 Million New Equity Financing and New Manufacturing Licensee]
Invest in BaishanCloud 
BaishanCloud - [BaishanCloud Announces Completion of Series C Plus Private Equity Financing]

 

Have questions?