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Contents

Methodology ........................................................................................... 1

PE/VC-backed IPOs Overview .............................................................. 2

VC-backed IPO Price Comparisons ....................................................... 5

Concluding Commentary ........................................................................ 9

Definitions ......................................................................................... …10

Acknowledgements ............................................................................. ..11

1

Methodology

For this study by SVCA, data was gathered from Preqin, CB Insights and publicly available

sources including company records, SEC filings and Yahoo Finance. Of the 771 PE/VC-

backed Initial Public Offerings (IPOs) from 2017 to 2019, 329 were listed on the Hong Kong

Stock Exchange (HKSE), New York Stock Exchange (NYSE), and NASDAQ. Of these, details

on share prices, conversion rates/stock splits were gathered for 187 IPOs filed with the SEC.

Share prices were compared between last round of VC funding (pre-IPO price), at IPO and 6

months after IPO (post-IPO price). Results were also compared between 46 unicorns

(companies with pre-IPO valuation above US$1bn) and 141 non-unicorns.

771 IPO

Exits

Recorded

from

Preqin

329 IPO

Exits

Recorded

from HKSE,

NYSE, and

NASDAQ

187 IPO Exits

Recorded from

SEC filings

2

PE/VC-backed IPOs Overview

Fig. 1: IPOs on NYSE, NASDAQ, HKSE from 2017 – 2019 by Industry Segment

Deep tech businesses dominated PE/VC-backed IPO numbers. In particular,

Pharmaceuticals, Biotechnology, Software, Internet and Financial Services were consistently

ranked within the top five industry segments.

0

10

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2017 2018 2019

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f Fi

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Pharmaceuticals Biotechnology Software InternetFinancial Services Medical Instruments Retail Education / TrainingConsumer Products Medical Devices IT Security TelecomsOil & Gas Healthcare Media Healthcare ITFood Electronics Utilities ShippingHardware Leisure Transportation LogisticsSemiconductors Manufacturing Business Services Construction

Dr Finian Tan Chairman

Vickers Venture Partners

Graphs & Analysis: SVCA Using Raw Data Compiled from Preqin, SEC Filings, Yahoo Finance

We used to be a top quartile generalist VC investing in B2C, B2B, deep tech etc.

But over the years we realise that guessing whether the market will buy a

particular product or service required more guesswork compared to assessing

whether a technology would work, especially in areas of our expertise. So, we

decided to just take one risk - tech, rather than multiple risks. Since then, our

homeruns doubled and our failure rate halved. So we doubled down on the

strategy, recruited more deep tech experts, open offices in regions where such

deep tech deals are in abundance, and our performance exploded. Today, we

are focussed on the 3 key tech trends that underpin the tech revolution of the

next few decades, biotech, nanotechnology and artificial intelligence and have

PhDs in all 3 fields.

3

Fig.2: Extended Rate of Return (XIRRs) of PEVC-backed Companies against S&P 500 (329 IPOs)

Graphs & Analysis: SVCA

Post-IPO Performance

Using extended internal rates of return (XIRRs), assuming a hypothetical investment at the

IPO price and divestment on 30 December 2019, the performance of PE/VC-backed

companies were compared against the 1-year and 3-year S&P500 benchmarks ending in

2019.

32.8% outperformed the 3-year S&P 500 index of 13% and 25.2% outperformed the 1-year

S&P 500 of 31%.

-100%

0%

100%

200%

300%

400%

500%

600%

700%

800%

900%

1000%Reaches >10,000%

S&P 500 2019: 31%

S&P 500 2017: 13%

S&P 500 2018: 14%

4

Fig. 3: Average VC-Funding Prior to IPO by Industry (from Seed/Series A to IPO)


On average, companies in the Transportation, Industrial, and Manufacturing industry

segments raised the most funding prior to IPO. It should be noted that the Transportation

Industry was populated by only 2 unicorns; Lyft and Uber which raised a combined funding of

USD 19.65 bn prior to IPO. It is also noted that companies in Biotechnology, Pharmaceuticals

and Financial Services (consistently within the top 5 IPO industry segments) raised on average

less than USD250m prior to IPO.

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5

VC-backed IPO Price Comparisons

Fig. 4: Pre-IPO and IPO Price Percentage Change

Graphs & Analysis: SVCA Using Raw Data Compiled from Preqin, SEC Filings, Yahoo Finance (The “X” s denotes average, the middle lines denote medians. Dots denote outliers.)

Clearly, the longer the time period between the last private financing round (pre-IPO) and the

IPO, the greater the price increase at IPO. This could be an indication of the companies’ better

financial position (hence reduced need for subsequent private financing). The longer time

period would also have allowed the business to show significant growth justifying the

increased price at IPO. This also debunks the myth that a pre-IPO round close to the IPO date

can help to boost the price at IPO.

Overall, about 20% of companies suffered a lower valuation at IPO than its last private

round.

A company deciding to go for a down round depends on several factors – does the

company have immediate cashflow needs ; which sector or sub-sector is the business

in and what is the outlook of this specific business in the current scenario; what are

the measures the business has put in place to control costs and more. If a company

urgently needs cash and is affected deeply by the current situation, it may be forced

to do a down round.

Srividya Gopalakrishnan

Managing Director and

Southeast Asia Leader

Valuation Advisory

Duff & Phelps

6

Fig. 5: Average Price Changes from pre-IPO to IPO and pre-IPO to post-IPO (Unicorn vs non-

Unicorns)


On average, unicorns outperformed their non-unicorn counterparts with the exception of

unicorns which raised their last private round within 9 months of going public. Six months post-

IPO, these unicorns grew in value on average only 7% compared to more than 46% for the

unicorns which raised their last private round more than 9 months prior to IPO reflecting a

possible public perception that the former were already fairly or overvalued at IPO.

Unicorn Last Private Round to IPO

0 - 9 Months 9 Months - 2 Years 2 Years - 4 Years > 4 Years

Average Increase IPO to 6 Months

Post-IPO 7% 98% 46% 50%

0%

100%

200%

300%

400%

Pre-IPO to IPO Pre-IPO to 6 Months Post-IPO

Unicorn (0 - 9 Months) Non-Unicorn (0 - 9 Months) Unicorn (9 Months - 2 Years)Non-Unicorn (9 Months - 2 Years) Unicorn (2 Years - 4 Years) Non-Unicorn (2 Years - 4 Years)Unicorn (> 4 Years) Non-Unicorn (> 4 Years)

Stock markets indices across the world have seen a significant double-digit

percentage fall since the beginning of the year. Many economies are

predicting recession for 2020. Generally speaking, valuation for most

affected sectors will reduce, the proportion of reduction varying based on

several factors. How quickly the tide can turn or the valuations recover,

depends on how soon this crisis can be overcome and how swiftly the

business can bounce back.

There are several uncertainties at this point of time.

Srividya Gopalakrishnan

Managing Director and

Southeast Asia Leader

Valuation Advisory

Duff & Phelps

7

Fig. 6: Pre-IPO – IPO – Post IPO Trend by Unicorn Status with Pre-IPO Basis


32.6% of unicorns listed at values below their last private round although 10.76% recovered 6

months after IPO. Thus, unicorns are twice as likely to suffer a drop in valuation at IPO

compared to non-unicorns. Six months post-IPO, 30.4% of unicorns were below their valuation

at the last private round, compared to 25.5% of non-unicorns which suffered the same fate.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Unicorn Non-Unicorn

Per

cen

t o

f P

op

ula

tio

n

Pre-IPO Price lower than IPO & Post-IPO Pre-IPO Price lower than IPO Price but higher than Post-IPO

Pre-IPO Price higher than IPO but lower than Post-IPO Pre-IPO Price higher than IPO & Post-IPO

The data from this study points to some of the challenges in delaying too long to go public as most of the upside has been priced into the private rounds. And yet, the public market remains the most efficient and sustainable platform for companies to consistently raise funds and gear up for long-term success. The private space has many advantages and opportunities for businesses, but it also encourages investment in higher risk asset classes. Moving those companies into the public space mitigates some of that risk.

The current environment in particular is a reminder that transparency, governance, discipline and community interest from public markets are all important elements that build investor confidence and ultimately shape companies to become more strategic and sustainable in the long run.

Mohamed Nasser Ismail,

Global Head of Equity

Capital Markets, SGX

8

Fig. 7: Average Percentage Increase between Unicorns’ Post-IPO vs Pre-IPO Price by Funds Raised

Prior to IPO

Based on the performance of 46 unicorns that went IPO in 2017-2019, unicorns that raised

between USD 100 – 500 million in total funding far outperformed unicorns which raised more

or less in funding. Even eliminating the outliers in each category such as Beyond Meat (raised

<USD100m), Zoom (raised USD100-500m) and iQiyi (raised more than USD1 bn), the results

still indicate a sweet spot for the USD100-500m range.

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

<=100 100-500 500-1000 >1 Billion Funding

Without

iQiyi

Without

Zoom

Without

Beyond

Meat


Jixun Foo

Managing Partner

GGV Capital

An economic downturn is a reality check for all businesses, unicorns or not. When

an overheated market cools down, good companies emerge faster and stronger.

Capital efficiency also increases when investors start to recalibrate and go back

to the fundamentals. With that said, the digital economy will continue to grow

as technology transforms the traditional one. In those markets, existing unicorns

with solid numbers and management teams are better positioned to win.

The “market share at all cost” approach will receive much more skepticism, as

people are reminded that the model only works if time is on your side. Amazon

burned money for all the right reasons and was incredibly disciplined in its

spending. Going through a tough time like this will help startups to focus and be

more responsible in their spending.

9

Concluding Commentary

Fig. 8: Number of IPOs in US Markets

Source: Statista 2020

While the report is based on data gathered well before the current downturn caused in large

measure by the Covid-19, it is clear that figures for IPO in the US markets have hobbled below

200 for the past 5 years, well below the numbers prior to the GFC. IPOs of PE/VC-backed

businesses have however consistently exceeded 50%. This study has shown that even under

the cast of unicorn spells, businesses with sustainable business models reinforced by

underlying innovation or technology have withstood the vagaries of public markets.

As the world reels from the current downturn and braces for the new normal, past recoveries

have shown that new opportunities will emerge from crises. Our forced experiments into new

ways of learning, living, playing and working will translate into great opportunities for PE and

VC in the years to come.

486

406

8470 71

226206 199

213

3163

154125 128

222

275

170

105

160192

159

0

100

200

300

400

500

600

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

10

Definitions

Cut-off Date : 30 December 2019.

Pre-IPO price : The Pre-IPO price is price at the last round of private investment

Pre-IPO date : The Pre-IPO date is defined as the date of the last round of private investment

Post-IPO price: The Post-IPO price is the price 6 months after the IPO date

Post-IPO date: The Post-IPO price is defined as the date 6 months after the IPO date

IPO price : The IPO price is as defined in the SEC filings

IPO date : The IPO date is defined as the date of the IPO.

Unicorn : Businesses with valuations equal to or exceeding USD 1 billion prior to IPO

11

Data Sources

Public Filings on SEC.gov

Yahoo Finance

Acknowledgements

The authors Doris Yee, Director, and Dominic Hosea Tan, Research and Communications

Executive would like to extend our sincere thanks to the various industry experts for sharing

their comments and insights.

This report is based on secondary market research, analysis of financial information available or provided to SVCA. SVCA has

not independently verified any such information provided to SVCA and makes no representation or warranty, express or implied,

that such information is accurate or complete. The information and analysis herein do not constitute advice of any kind, is not

intended to be used for investment purposes, and neither SVCA nor any of its respective officers, directors, employees or agents

accept any responsibility or liability with respect to the use of or reliance on any information or analysis contained in this document.

This work is copyright SVCA and may not be published, transmitted, broadcast, copied, reproduced, or reprinted in whole or in

part without the explicit written permission of SVCA.

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