It’s a pleasure to see several of our portfolio companies listed on the 2012 Technology Fast 500 Rankings published by Deloitte.
Rank | Company Name | Revenue Growth (2007-2011)
#1 | Tesla Motors | 279684%
#41 | BrightSource Energy | 3547%
#62 | Facebook Inc. | 2325%
#82 | LinkedIn Corporation | 1507%
#255 | Bluebeam Software | 320%
Congratulations to all involved!
After a year of delayed greentech IPOs (BrightSource Energy, Silver Spring Networks), we are happy to see SolarCity announce pricing for its forthcoming IPO pegged for December 11, 2012 at $13 to $15 per share. Apart from reading the S1, a great way to quickly get up to speed on the business model is to view this roadshow presentation.
We’re excited to announce that Union Square Ventures (USV) led a $9.1 million series B round for Pollenware, one of our early stage investments. Fred Wilson put a nice post in his blog AVC about Pollenware, which is a marketplace that connects suppliers and their buyers and conducts real-time auctions for accounts payable and accounts receivable payments. We love opportunities to cut out the financial middleman, and we congratulate Sandy and the team on building a business that is clearly beneficial for all parties involved and is growing very nicely.
We are proud to announce that LoveIt officially launched to the public today, and that Juvo Capital was the lead investor for LoveIt’s Series A funding round of $6 million. Why did we invest in LoveIt? LoveIt is a potentially disruptive entrant in the social networking space, and is led by an experienced team that we have successfully worked with in the past.
Let’s face it, the public is getting bored of the monotone blue and grey website that promises us more updates about what our friends did today and what our acquaintances ate for dinner. The verdict is out: The cool kids aren’t using Facebook anymore. Instead we want to connect with people that share similar interests and passions, and that post and consume information that inspires us. In an increasingly visual world, we don’t even want to read 140 character bite size updates. Instead we want to consume beautiful images that are worth 1000 words. Users have flocked to Tumblr to post images that have meaning, but often without comments or links to sources. That limits the usefulness of Tumblr’s platform. Pinterest has clearly taken the lead in providing a valuable experience to people that create, curate and consume visual content but this industry is young and ripe for competition. We saw skepticism among venture capitalists when we launched a new comparison shopping engine called Smarter in 2004, but within a few years, we were the fourth largest comparison shopping engine in the US and had expanded to China and Japan. Now, we see an opportunity to carve out a meaningful share of the fast growing visual social market, and we are investing to win.
Post Facebook IPO, we are asking ourselves a number of different questions about the implications of the Facebook IPO for private company investing. Specifically:
1. Did private marketplaces offer investors a good opportunity to purchase Facebook shares prior to their IPO?
A. Yes until Q4 2010. In Q3 2010, prices were ~$13 and increased to $30 by January 2011. The last 15 months prior to the IPO were not a good time on a risk adjusted basis to buy Facebook stock.
2. Are there still opportunities to profit in buying private company stock through private marketplaces?
A. Maybe, but not for companies that are hot, well known and advanced in their valuations. I think it would be difficult to make a compelling case for buying shares of billion dollar companies like AirBnB, Dropbox, Pinterest, Square, or Twitter.
3. How long will the current liquidity window remain open for often unprofitable and immature consumer Internet companies?
A. ??? but the underwhelming Facebook IPO, “The Patterson Cycle”, and slow economic recovery probably don’t help.
4. How will private company valuations be influenced by the Facebook IPO?
A. I think people will be more cautious.
Facebook priced its initial public offering at $38 a share on Thursday, May 17 and began trading this morning at $42.05, and closed at $38.23. While the IPO certainly didn’t generate the irrational enthusiasm that many including myself expected, the question is whether we took on too much risk for the level of return we will ultimately achieve. After 322 days, we are up 20% while the S&P500 was up 10% during the same period. It certainly does not feel like the risk adjusted return was worth it.
Looking back on public pricing information from private transactions in Facebook stock at both Sharespost and SecondMarket, it is clear that there was a dramatic increase in Facebook’s share price in Q4 2010 just prior to the news was published that Goldman Sachs was investing in Facebook at a $50 billion dollar valuation. Investors who came in at $13/share in Q3 2010 have smiles, while investors in 2011 invested in the mid 30′s per share. My assumption is that the vast majority of Facebook purchases occurred after the Goldman investment (as ours did), and that Facebook was probably substantially overvalued (and may have been sold in the private marketplaces for higher than the FMV that Facebook used in valuing Facebook employee shares or RSU’s). This might suggest that opportunities to make money in private marketplaces are limited to investing in less well known names where valuation is still relatively opaque.
One day prior to going public, BrightSource Energy pulled their IPO citing challenging market conditions even though they priced in the middle of their range at $22. The last time I looked, the S&P 500 was up almost 8% year to date. It sounds like the market is challenging for solar companies that have executional risk. Obviously this is a big disappointment.
Over the last year, we have sharply reduced our investments in Greentech recognizing that although we have done well with Tesla Motors and SolarCity, we fundamentally don’t have the in-house expertise and experience to make large investments in this space. Instead we are turning our attention much more to Consumer Internet where we have the capability to make educated bets.
During the first quarter of 2012, we made four new investments:
BeachMint combines the business model of direct to consumer subscription ecommerce with celebrity promotion and social marketing across multiple channels including jewelry, shoes, women’s fashion and beauty products. BeachMint recently raised $35 million led by Accel Partners, with participation from Goldman Sachs, New World Ventures, Millennium Technology Value Partners, and other previous investors. This brings total funding to date to $75 million.
LoveIt is a well funded start-up in the image discovery and collection space. While Pinterest has achieved amazing traction in building consumer traction for its’ pinning product, we believe that there are a number of product innovations that could allow LoveIt to grow even faster, and provide more value to users. A public launch should occur mid 2012.
SpaceX is the first privately-funded company to successfully launch, orbit and recover a spacecraft. The future for space transportation will include private companies, and we expect SpaceX to be a leader in transporting both supplies and humans to the International Space Station, launching satellites, and beyond. Founded in 2002 by Elon Musk, SpaceX has over 1250 employees and has been profitable between 2007 and 2010.
StyleHaul is the #1 channel network on YouTube for style, fashion, beauty and shopping related content with more than 25 million unique visitors each month.
I attended the Tesla Model X launch last night at the SpaceX headquarters in Hawthorne, and liked the car so much that I made my fourth Tesla reservation. Why? The Tesla Model X is a SUV that combines the practicality of the minivan, the cool of the SUV, and the performance of a sports car. The Model X appears to seat 7 adults comfortably, without requiring any movement of the middle row to access the back row of seats partly because of the new fangled falcon retractible doors. The luggage compartment in the front and the back of the car is substantial, and I have a picture of two ladies sitting in the front of the car which is smaller than the back. Acceleration is projected to be 4.4 seconds from 0 to 60 mph which is clearly in the range of a high performance sports car.
At the end of the presentation by Elon Musk, there was an opportunity to make a $5,000 or $40,000 refundable reservation before reservations became available on Friday at noon to the general public. I had to get in line to make a reservation and probably had at least 30 people in front of me. I suspect this will be the fastest selling car in the Tesla model line-up, and the stock price should react favorable, but the stock was down almost 10% at one point this morning. I bought some Tesla calls and wrote some puts this morning and suspect that we should have a near term announcement that reservations for the Model X were larger than expected.
Update: I received reservation sequence number #16 for the Tesla X.