Weekly Update #256: How Does the Class of 2018 Compare?

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Hello Investors,

  

2018 is still shaping up to be a solid year for IPO activity. So far, 11 VC-backed companies have successfully debuted on the public market and two IPOs (Domo and Bloom Energy are pending). This compares to just seven at this time last year.

 

How does the class of 2018 stack up so far? We took a look at various metrics across IPO vintages since 2014. Note that in order to keep fundamental metric comparisons apples-to-apples, we focus solely on SaaS companies (which generally form the bulk of VC-backed IPOs anyway).

 

  • Market performance has been strong. 2018 IPOs were solid out of the gate. The stocks continued to post gains in the days after IPO, led by ZUO, DOCU and DBX.

 

Average Returns, Days after IPO (indexed)

Source: Ycharts

 

  • Revenue growth slightly lower. Note, however, that 2018 vintage IPOs have higher absolute revenue. This could signal more mature companies at a later (and lower growth) phase in their company life cycles.

 

Source: Company filings and EquityZen


Median Revenue Leading Up to IPO

Source: Company filings and EquityZen


  • Gross margins about average. 2018 SaaS IPOs were mixed on margins, with strong numbers from ZS, DOCU and CBLK offset by weaker margins at ZUO and DOMO. Overall, gross margins essentially matched prior years.

Gross Margin, 7 Quarters Leading up to IPO

Source: Company filings and EquityZen


  • Operating margins are trending prior year IPOs. Given relatively consistent gross margins with prior vintages, higher R&D and marketing spend appear to be the key culprits weighing on operating profitability.

Operating Margin, 7 Quarters Leading up to IPO

Source: Company filings and EquityZen


Sales & Marketing to G&A, 7 Quarters Leading up to IPO

Source: Company filings and EquityZen


R&D to G&A, 7 Quarters Leading up to IPO

Source: Company filings and EquityZen



What’s in store for the rest of the year? We continue to view market conditions as generally supportive of VC IPOs, with SaaS multiples continuing to trend above historical averages. Our IPO outlook provides additional thoughts on which companies could look to debut on the public markets.

SaaS Multiples

 

Source: Ycharts
 
Other items we are reading: 
 

 

 

Thanks,
Catherine Klinchuch 
Finance & Research Lead, EquityZen

 

FUNDING ROUNDS SINCE LAST WEEK

Invest in Opendoor 
Opendoor - [Opendoor raises $325M in Series E round]
Invest in CrowdStrike 
CrowdStrike - [CrowdStrike Finds $200M More In Series E Funding, Now Valued At $3 Billion]
Invest in ezCater 
ezCater - [ezCater raises $100M as it looks to own office catered meals around the world]
Invest in Scopely 
Scopely - [Mobile-Games Company Scopely Raised Additional $100 Million for Acquisitions, Investments]
Invest in TouchBistro 
TouchBistro - [TouchBistro close to wrapping up $70 mln round: report]
Invest in Pipedrive 
Pipedrive - [Pipedrive Raises $50M in Series C Financing]
Invest in SigFig 
SigFig - [SigFig raises $50 mln]
Invest in Evolve Biosystems 
Evolve Biosystems - [Evolve BioSystems, UC Davis baby-probiotic spinout, is going global with new $40M financing]
Invest in Emulate 
Emulate - [Emulate Adds $36M to Expand “Organ Chip” Drug Research Technology]

 

Have questions?