New post up on TechCrunch: The Kingmaker Strategy. Tried to go into a bit of depth on how the Chinese Internet giants are approaching their (increasing) investments in private technology companies.
This morning we announced the closing of our newest fund, GGV V. It’s a $620 million venture capital fund focused on investing in great entrepreneurs in the U.S. and China, and mirrors the size and strategy of our prior funds: Fund IV ($525 million) and Fund III ($600 million).
The most important takeaways:
1) It’s another $620 million that will go towards the financing and growth of great companies. That’s good for entrepreneurs.
2) It’s another strong sign that the venture capital model is alive and well. We had more than 2X committed demand from our limited partners (our investors) and a relatively short fundraising process. The message was clear: investors in the VC asset class believe the opportunity for disruption and innovation over the next 5-10 years is as great as it’s ever been, and returns from top VC firms have been stellar for the past few years (outpacing hedge funds and other “alternative” investments).
We want to be the first call for entrepreneurs building category-defining companies across the U.S. and China. Thanks to the support of our LP’s, Fund V will enable us to continue to focus on that mission.
Read the TechCrunch article on the new fund here.
New post up today on TechCrunch where I provide a bit of an insider’s look at the success of BlueKai. It’s a story I think will resonate with many entrepreneurs, and is titled “Success, Reality and the Myth of “Up and to the Right.”
This morning I posted an article on Fortune.com entitled “The Real Winners of 2013: Tech IPOs from 2012.” Ted Tobiason (@TedTobiasonDB) and the team from Deutsche Bank helped us pull together some astonishing stats about the IPO Class of 2012, starting with the fact that the average tech IPO from 2012 is up 170%. You can read the article at Fortune.com or below.
The year 2013 was a banner year for venture-backed technology IPOs. According to the National Venture Capital Association (NVCA), 82 VC-backed companies raised $11.25 billion in IPOs in 2013, the most VC-backed IPOs since 2007. Public market investors showed strong interest in many of these offerings at IPO as well as afterward – the average IPO from this class had traded up 64% through the end of the year (and 15 were up more than 100%).
Impressive numbers for the Class of 2013 by any measure. It is worth noting that 2013’s numbers were significantly up from 2012 in both number and dollar volume if Facebook (which accounted for $16 billion of 2012’s total of $21.5 billion) is excluded from the 2012 numbers (as shown in the chart above).
From the vantage point of venture capitalists, founders and employees of these tech companies, however, the most important measure of a company’s IPO is how the stock is performing a year or two down the road. The reason for this is simple – most VC’s and employees aren’t selling at the IPO. The standard lockup (a window in time where insiders cannot sell shares) is typically 6 months, and many insiders and employees will wait (or vest) and sell down their positions over time. Performance beyond the first year is also critical for the health of the overall IPO market, as public market investors who bought into high performing IPOs are often inclined to support additional offerings over time (in other words, the Class of 2012 is an important leading indicator for 2014 and beyond).
So for technology investors (and the pension plans, endowments and individuals that invest with them) and employees, the important question to ask is “How is the IPO Class of 2012 doing?”
The short answer – unbelievably well. To the tune of over $100 billion of market capitalization increase since IPO. To look deeper, I reached out to Ted Tobiason, Managing Director at Deutsche Bank, whose team helped craft the following data points (all data as of 1/2/2014):
– The average tech IPO from 2012 is up an astonishing 170% from its offering price
– 18 of 42 tech IPOs from 2012 are up over 100% from their offering price, while just 9 trade below their offer price and 4 have been acquired (Acquity, Eloqua, ExactTarget and Kayak)
– The IPO Class of 2012 has added more than $111 billion of market capitalization since IPO ($57 billion by Facebook, $54 billion by all other IPOs combined)
– Here are the top 10 performers from the IPO Class of 2012, ranked by percentage increase from the IPO offering price to January 2nd, 2014 (market close last week):
(Note that this data reflects an analysis for 42 of the 49 IPOs from 2012, as the NVCA data also includes biotech IPOs, while our analysis does not.)
While IPOs from high-profile companies like Facebook get the bulk of media attention, an astonishing amount of value has been created broadly by the IPO Class of 2012 over the past two years. In fact, more value has been created by these companies since IPO than was created prior to IPO: the $54 billion referenced above is up from a starting point (at IPO) of $33 billion.
So – what conclusions can we take away from these data points? To be fair, they have to be taken in the context of an overall bull market which saw the NASDAQ Composite rise 56% and the Dow 34% from the beginning of 2012 to the end of 2013. Nonetheless:
1) Public market investors are clearly showing a massive appetite for new offerings and the growth rates that typically come with them; the average IPO from 2012 and 2013 was growing at 44% in the calendar year of its IPO
2) The Class of 2012 performance is not just driven by a few outliers; though the top 10 drive up the average (mean) performance considerably (to 170%), the median for the Class is an impressive 84%
3) Pricing at the time of IPO is often considered an indicator of the “hotness” of an IPO, but may not be a great indicator of future performance; all 5 of the top performers from the Class of 2012 priced below the midpoint of their IPO filing range
It will be interesting to see how the Class of 2013 fares in 2014, when lockups expire and early shareholders and employees can begin to sell their holdings.
They’ve got big shoes to fill – the Class of 2012 has knocked it out of the park.
Disclosure: GGV Capital is an investor in YY. Related to this topic: why certain companies do well post-IPO; for more, see my Partner Glenn Solomon’s post “How LinkedIn Became a Wall Street Juggernaut.”
Filed under: News, Uncategorized, Venture Capital | Tagged: 2012 IPO, 2012 IPOs. 2012 Tech IPOs, AMBA, Ambarella, DemandWare, DWRE, Facebook IPO, IPO, IPO Class of 2012, IPOs, NVCA, PRLB, Proto Labs, SCTY, Shutterstock, SolarCity, SPLK, Splunk, SSTK, Ted Tobiason, The Real Winners of 2013, VIPS, VIPShop, WAGE, WageWorks, Yelp, YY | Leave a comment »
Just finished reading Brad Stone’s excellent book “The Everything Store: Jeff Bezos and the Age of Amazon.” I’ve recommended it to every entrepreneur I’ve met for the past few weeks. So many great nuggets to take away about entrepreneurship, product development, innovation and execution. I highlighted many sections throughout the book, and here is one of my favorites from Rick Dalzell, Amazon’s CIO from ’97-’07:
“Jeff does a couple of things better than anyone I’ve ever worked for. He embraces the truth. A lot of people talk about the truth, but they don’t engage their decision-making around the best truth at the time. The second is that he is not tethered by conventional thinking. What is amazing to me is that he is only bound by the laws of physics. He can’t change those. Everything else he views as open for discussion.”
A great read for anyone who is an entrepreneur or who cares about the inside story of development of industry game-changers like AWS or the Kindle.
As an entrepreneur and CEO, I was always amazed at the impact one key addition to our management team could make. Now, having been a VC for 5 years, it’s something we see regularly in our portfolio. A company brings in a rockstar to fill a key role on the management team and boom! – he or she makes an immediate impact, bringing new ideas, new insights and generally disrupting the status quo (in a good way). We think we’re going to see the same with Hans, and that’s great for entrepreneurs, our Limited Partners, and our firm.
We’ve had the benefit of knowing Hans for more than 8 years – often competing or collaborating to work with the best entrepreneurs in China. Hans is well-known for leading investments in several of China’s top companies, including mobile device leader Xiaomi (the fastest company ever to go from $0 to $1 billion in revenue), mobile game company Forgame (which recently completed its IPO at a valuation of over $1 billion) and e-commerce innovator Vancl (one of China’s emerging e-commerce leaders).
Over the next 5-10 years, the most significant companies in the mobile and Internet sectors will find ways to succeed across the US and China like never before, with US companies expanding to China and Chinese companies coming to the US (see our recent co-investment with Alibaba Group in Quixey). As a firm, we are laser-focused on being the #1 choice for entrepreneurs seeking to expand across these two markets. When we had a chance to add Hans to the team to further that mission, we jumped at the opportunity.
I first met Tomer and the team at Quixey in 2011, and have been amazed at what they’ve accomplished since then. We’ve had a longstanding relationship with Alibaba since investing in the company in 2002 and jumped at the chance to work together with Quixey.
Why are we so excited about Quixey? For starters: 102 BILLION.
That’s the number of apps Gartner projects consumers will download on their mobile phones this year worldwide, generating more than $26 billion in revenue. For a market that by all respects didn’t even exist 6 years ago.
The team at Quixey has a very, very big vision in which consumers are able to leverage the apps, data and capabilities of their smart mobile devices to the max. It’s also a vision that is decidedly “open” (i.e. not controlled by Google, Apple, or…) and focused on enabling consumers and app providers to deliver the best possible experiences to consumers.
Perhaps both GGV and Alibaba are colored by our experiences in China, but we see the market accelerating at warp speed to a mobile environment. Industry segments we don’t even recognize yet will be created overnight by companies we are just starting to hear about today. Uber and Instagram are perhaps the best examples to date, but there will be others.
Alibaba is one of the strongest technology and consumer companies on the planet, with an e-commerce business that is larger than Amazon and eBay combined. The company has an enormous strategic focus on mobile (see the announcement earlier this year that Jack Ma joined the board of UCWeb, a GGV portfolio company with more than 400 million users worldwide).
It’s going to be awesome to watch the Quixey team execute on its vision, now with plenty of capital and the support of Alibaba Group.
A massive industry shift is underway: the $400 billion online travel industry (roughly 40% of the $1 trillion total travel market) is moving from desktop to mobile. Travel industry research firm analyst PhocusWright expects mobile travel sales to triple from 2012-2014 (reaching $25.8 billion) and research firm eMarketer projects will reach $48 billion in 2017 (see chart below).
Leading the charge in the $300 billion hotel industry is HotelTonight. Launched in 2010 by travel industry veterans Sam Shank , Jared Simon and Chris Bailey, HotelTonight has grown to become the #2 hotel travel app on the iOS app store and support millions of travelers in over 120 cities in 12 countries.
To continue its global expansion, the company today announced its $45 million Series D round of financing from Coatue Capital and GGV Capital, along with existing investors Accel Partners, Battery Ventures, USVP and First Round Capital.
As tech media readers are probably tired of hearing, the global shift to mobile is massive, and is happening rapidly across many, many industries. Notable examples where new entrants have entered large existing industries, rapidly captured significant share and created billions in market value include (desktop leader on left, mobile innovator on right):
Consumers and the media are probably tiring of VC’s talking about this massive shift, but it’s hard to overstate. In almost every industry, analysts and CEOs are talking about the shift happening “faster than anticipated.” This is especially true when taking a global view (as we do), and take into consideration markets like China and India, where more than a billion consumers will experience the Internet for the first time on a mobile device over the next few years.
Mobile users want a mobile experience, not a web experience on a mobile device (for more on this, read Sara Lacy’s Pando article today). HotelTonight nails it with a great experience for both end users (I happen to be one – my favorites in SF via HotelTonight are the The Westin, Hotel Vitale and the Clift) and more than 3,000 hotel partner properties around the world.
With this new financing, HotelTonight will continue to expand on a global basis, an effort we are thrilled to help support. We’ve had a terrific window in the travel market in Asia via Qunar, China’s leading online travel site, and Tujia, the leading platform for home vacation rentals in China.
In short – great team, great product, huge market, massive disruptive shift underway. Very excited for Sam, Jared, Chris and the team at HotelTonight!
Edit @ 11:00 am PST: Here are are a few links to media coverage of HotelTonight’s announcement today:
Financial Times: “HotelTonight finds room for $45M”
PandoDaily: “Will HotelTonight be the next big travel IPO?”
BusinessInsider: “HotelTonight raises $45M round”
A few months ago I wrote a post titled Content, Community and Commerce: Why Verticals Win. It’s been a frequent topic of conversation over the past few months, and today PandoDaily wrote an article on Houzz that brilliantly dissects a number of factors leading to the company’s rapid rise in the home improvement vertical.
In a nutshell, it highlights the self-reinforcing benefits of a highly engaged, growing user base with common interests and passions – and the magic that combination can generate, particularly with respect to content. From the Pando article:
But it’s not the sheer number of people using Houzz, be it as a daily obsession or an integral part of their business, that’s so impressive. It’s the level of content that this audience outputs and the rate at which it’s accelerating. Today, Houzz announced that it has surpassed 2 million HD design and remodeling images available on its platform. It took the company more than three years to see the first 1 million images uploaded, and yet it doubled that amount in just the eight months since the beginning of the year.
While Adi, Alon and team are leading the charge in many ways, we are seeing this happen across many market segments as users migrate from horizontal platforms to vertical ones (see my original post for other examples). And yes (disclosure), my firm GGV Capital is an investor in Houzz.
Really excited to post this article today on Fortune.com: The Quiet Successes That Drive Silicon Valley. So many great entrepreneurs doing so many great things every day – but you don’t read about them on Twitter or TechCrunch. Sorry Vijay and Ryan for shining the spotlight on you :)