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Practitioners Insights Valuing Tech IPOs
Practitioners Insights Valuing Tech IPOs
Practitioners Insights Valuing Tech IPOs
September 2021
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Section Title
b) Market Potential
c) Relative Analysis
• The graph above represents the total funds raised by companies through IPO and number of companies listed (excluding SPAC) in last
10 Years
• 2021 has been the blockbuster year with highest number of IPO deals and highest gross proceeds raised from IPO
• In the last 12 months, Technology, Media and Telecommunication (TMT) sector witnessed deals with highest funds raised
• In the last 12 months, Healthcare sector has seen a lot traction in respect of number of IPOs considering the global impact of the
pandemic, COVID-19. However, followed by healthcare, TMT has witnessed the greatest number of IPOs issued.
Note: The IPOs count and value are exclusive of SPAC transactions
Source: S&P Capital IQ, Renaissancecapital
Private and Confidential September 23, 2021
Top 10 US IPOs (2020-YTD)
Across All Sectors
$2.0 Bn
$1.0 Bn
$.0 Bn
Mar/20 Apr/20 Jun/20 Aug/20 Sep/20 Nov/20 Jan/21 Feb/21 Apr/21 Jun/21 Jul/21
200 60,000
40,000
100 59
34 46 20,000
7 15 9 10 12 20 13
1
- -
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD
• Special purpose acquisition companies (SPACs) have been around since the 1990s. Yet, 2020 saw more SPAC IPOs than all
previous years combined and was the first year where SPAC IPOs exceeded traditional IPOs.
• The first two quarters of 2021 saw a continued expansion in the number of SPACs formed. In a statement on April 8, 2021, the U.S.
Securities and Exchange Commission (SEC) said: “Over the past six months, the U.S. securities markets have seen an
unprecedented surge in the use and popularity of special purpose acquisition companies.”
• The graphs shows the number of SPACs that got listed in each calendar year with gross proceeds received through IPOs.
Source: SPACInsider
Private and Confidential September 23, 2021
SPACs: Highlights (2/2)
0.8%
Technology, Media &
1.1% 0.3% Telecommunication - 27.0%
Healthcare - 20.7%
6.3%
Consumer Discretionary & Staples -
9.4% 18.2%
27.0%
Industrial - 16.3%
Materials - 9.4%
16.3%
Financials - 6.3%
Energy - 0.3%
Source: D&P SPAC Market Report, S&P Capital IQ, SPAC Insider
Private and Confidential September 23, 2021
Top 10 US de-SPACs (2020-YTD)
Across All Sectors
TMT
$35 Bn
Industrials
$30 Bn
Grab Holdings Inc., $36 Bn
$20 Bn
SoFi Technologies,
Joby Aviation, Inc. , $7 Bn
Inc. , $8 Bn
Aurora Innovation, Inc., $11 Bn
$5 Bn
CCC Intelligent Solutions Holdings
Inc. , $8 Bn
$ Bn
Jun/20 Aug/20 Sep/20 Nov/20 Jan/21 Feb/21 Apr/21 Jun/21 Jul/21 Sep/21
• Rates in the US and the Eurozone are at an all time low (almost zero), and are expected to remain so in the short term till 2022 – 2023
• Near-zero risk free rates translates to lower cost of capital, with reduced return requirements and higher present value of asset cash
flows. This makes the high-risk-high return investments (Early stage and Emerging Markets) much more attractive
Source: Bloomberg
Private and Confidential
Key Drivers: High Liquidity/ Money Supply (2/2)
• Liquidity is at its peak in both, the US and the Eurozone, thanks to the welfare and social security expenditure triggered by the Covid-
19 Pandemic. 40% of US dollars in existence were printed in the last 12 months alone.
• Higher money supply has put ‘excess’ money in the hands of people, sitting on unprecedented volume of savings. These savings are
driving the asset prices given zero (to negative) interest rates if kept in a bank.
350
372.7
300
250
200 230.8
150
100
0
Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 Sep-21
S&P 500 (TR) Dow Jones U.S. Technology Total Return Index S&P North American Technology Sector Index (TR)
• Comparative Analysis shows that total return for the trailing 5 years for Dow Jones and S&P’s Technology Sector Index is approximately
1.5 times as compared to S&P 500.
• The recent volatility in the market due to COVID and the disruption in business activity has further increased the spread between the
technology sector indices and broader market index.
The returns have been normalized by taking base year return as 100
Source: S&P Capital IQ, CNBC
Private and Confidential
Tech Index Analysis (2/2)
• The table above depicts 5-year annualized returns of all the major indices in the US. Tech Sector Indices have outperformed
all other indices including S&P 500 by a wide margin of 12%-13%. This implies a continuous strong growth in the constituent
companies of these indices.
• Further, in 2021 tech sector is experiencing all-time highs inducing a sudden surge in new issues/ public offerings as the
investors do not fear the impact of COVID on tech companies.
• Given the way technology is positively influencing the world and making companies more efficient, this trend is more than
likely to continue going forward.
COVID-19 declared as
pandemic by WHO on Total Price Return
Return on FAANG and S&P 500
March 11, 2020 (Jan-20 to Sep-21)
250.0 10
200.0 8 82.1%
7
150.0 6 83.3%
5
100.0 4
103.1%
3
50.0 2
1 76.5%
- 0
Jan/20 May/20 Sep/20 Jan/21 May/21 Sep/21
Facebook Amazon Apple 112.2%
Netflix Google S&P 500
S&P 500 Information Technology
• Facebook, Amazon, Apple, Netflix and Alphabet (FAANG) have outperformed the broader markets over the past month, retaking leadership of
the S&P 500 with a combined market capitalization was over $7 trillion as of September 2021.
• FAANG combined has returned a 45.4 percent annualized total return from January 1, 2020, to September 15, 2021, as compared to 20.4 per
cent for the S&P 500 and 34.8 per cent for the S&P 500 Information Technology Index.
• Why do people chase FAANG: Probability of default of Market Leader is low, irrespective of how the companies are valued, they will emerge
as leaders, therefore people invest aggressively in the top tier companies.
Impact of crackdown on MCap of Chinese tech giants (USD Bn) Impact of crackdown:
800 -45% 1. $ 1.5 Tn in Market Cap lost in less than a year
-41.4%
700 -40%
600 -35% 2. Alibaba and Tencent together lost over $700 Bn in MCap.
-32.2%
-30%
500 3. The Chinese government-initiated cybersecurity reviews of
-25%
400 Didi and a number of other China-based companies. As a
-19.9% -20% result of that development, DiDi reportedly isn’t allowed to
300 -17.6%
-15% register new users
200 -10%
100 -5% Three sectors that are important for the middle class:
- 0%
Alibaba Tencent Meituan Didi • Education
Before After Change in market Cap
• Healthcare
• Housing - Affordable
Wealth of Billionaire's (US$ Tn)
3.6
1.8x
1.7
1.3 11.1x Aims of the Chinese authorities:
0.14 1. Common Prosperity – Managing the rich & poor gap
• The largest de-SPAC deal in the TMT sector in last 12 months was of Aurora Innovation Inc., a California-based self-driving software company. The
transaction valued the company at $10.8 billion. Some of the notable TMT transactions in last 12 months are as follows:
Feb-21 CCC Dragoneer Growth Application Hosting United States Provides SaaS platform for the property and casualty 7,533.0 2,210.2 3.5x 13.2x 12.8x 47.4x
Intelligent Opportunities Corp. Services insurance economy.
Solutions
Holdings Inc.
Jan-21 SoFi Social Capital Consumer Digital United States Operates an online platform that provides financial 7,962.7 12,164.7 21.5x NA NA NA
Technologies, Hedosophia Holdings Lending services.
Inc. Corp. V
Jan-21 Latch, Inc. TS Innovation Application United States Designs and develops application software. The Company 1,036.0 1,032.7 57.2x NMF NA NA
Acquisitions Corp. Software offers building automation system for residents, third
parties, guests, couriers, and services providers.
Dec-20 Katapult FinServ Acquisition Data Processing United States Provides lease-purchase platform, providing alternative 910.9 971.3 4.7x 20.0x NA NA
Holdings, Inc. Corp. and Outsourced solutions for retailers and consumers
Services
Oct-20 BTRS South Mountain Application United States Provides cloud-based software and integrated payment 1,349.1 1,382.7 13.1x NMF 12.1x NMF
Holdings Inc. Merger Corp. Software processing solutions.
Sep-20 Advantage Conyers Park II Media United States Operates as a marketing agency. 2,271.2 5,143.6 1.5x 10.5x 1.4x 11.3x
Solutions Inc. Acquisition Corp.
Sep-20 Skillz Inc. Flying Eagle Media United States Online mobile multiplayer video game competition platform 3,345.7 3,276.8 19.5x NMF 14.1x NMF
Acquisition Corp.
Mean 3,689.6 2,975.5 36.4x 127.5x 10.1x 29.3x
Median 3,323.4 3,276.8 19.5x 27.1x 12.5x 29.3x
Mean (Techonology) 3,909.9 2,622.7 43.8x 166.5x 12.5x NA
Median (Technology) 3,626.0 2,473.0 29.2x 34.2x 12.5x NA
Transaction Highlights:
Reinvent Technology Partners Y and Aurora Innovation Inc.
• We have searched for IPOs that took place in the last five years on major US stock exchanges. We have filtered the companies based
on Market Cap of more than USD 1 Bn as on the date of first trading, and then prepared our analysis on the shortlisted 90 companies.
• Following are the top 3 IPOs from each year which we have considered in our analysis:
2017 2016
Market Cap Market Cap
Top 3 IPOs Top 3 IPOs
(USD Bn) (USD Bn)
$ 123.2 $ 66.6
$ 36.9 $ 38.9
$ 24.6 $ 15.7
*Market cap is as of the date of listing
Source: Our Analysis and S&P Capital IQ
Private and Confidential September 23, 2021
Tech IPO Study: Key Trends (1/5)
• There is a significant jump in the market cap in the last five years, and the Average/ Median Market Cap Returns have been amongst
the highest in 2021 for each of the IPO sets portraying that tech sector has significantly picked up in the ongoing COVID era.
• Average Stock Return Multiple has zoomed, increasing three-fold times in a span of last three years and almost doubled in the last
one year, indicating expectation of even higher earnings of the companies in future (or re-pricing).
• Pinterest which got listed in April 2019 has had a tremendous growth becoming 4x in these two years, jumping from USD 12 Bn to
USD 48 Bn. Further, Snap Inc, which got listed in March 2017, the market cap grew by ~370% in the last one year.
• Average/ Median Revenue Growth for all companies listed in the last five years were highest in and around the IPO year, and
thereafter have been declining in the successive years. However, the overall revenue CAGR continue to be robust between 30%-40%
• Average Revenue Growth Multiple for all companies have increased substantially post IPO, resulting in 2x – 3x revenues
• Revenue Growth for the companies IPO’d in 2019 is significantly higher due to high performing companies like Zoom (CAGR of
159%), Crowdstrike (CAGR of 103%), and Pinterest (CAGR of 60%).
• A ratio of Average Stock Return Multiple / Average Revenue Growth Return Multiple indicates if the stocks have usually grown
in-line with the underlying revenue; 1x ratio indicates par level returns and growth
• The said ratio appears to have got overheated in the last one year, going much beyond 1x; indicating either a stock over-run or
an increased expectation of higher revenue growth in the near future, or a combination of both. This trend is further highlighted
in the expanding EV/ Revenue multiples specially in the last one year.
• Average EV/ Revenue multiple for 2019, has been driven by Bill.com Holdings’ multiple of 118x in 2021. Further, companies
listed in 2020 like Snowflake traded at a revenue multiple of 177x.
Source: Our Analysis and S&P Capital IQ
Private and Confidential September 23, 2021
Tech IPO Study: Key Trends (4/5)
D. Profitability heatmap
Average EBITDA Margin% Median EBITDA Margin %
IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO IPO
Year Count Year Year +1 Year +2 Year +3 Year +4 Year +5 Year Count Year Year +1 Year +2 Year +3 Year +4 Year +5
2016 7 -9.6% -7.1% -3.5% -7.1% -9.4% -6.2% 2016 7 -15.8% -9.5% -5.9% -4.7% -1.7% -1.9%
2017 10 -20.3% -12.7% -15.1% -10.2% -3.4% NA 2017 10 -17.6% 8.8% -12.7% -11.8% -2.7% NA
2018 21 0.9% -7.5% -2.5% -2.6% NA NA 2018 21 -0.5% -8.4% -7.8% -2.5% NA NA
2019 18 -17.7% -30.2% -15.2% NA NA NA 2019 18 -10.0% -22.0% -10.9% NA NA NA
2020 34 -8.2% -32.6% NA NA NA NA 2020 34 -2.5% -13.1% NA NA NA NA
• Average / Median EBITDA margins for all the companies listed in last 5 years continues to be negative. There is a general trend
of an improvement in operating margins over the years (though still negative) and the older listed companies are approaching
break-even point.
• Interestingly, while the margins continue to be negative, Average / Median FCFF (as a % of Revenues) are positive and
increasing for all companies. Infact, the FCFFs have seemed to zoomed to the highest levels in 2021!
• Should this explain the stock returns over-running the revenue growth?
• There is a continued trend of negative net working capital (NWC) for all the companies. Further, the trend appears mixed wherein it
has increased for certain IPO sets (like 2020), it appears to have remained similar or decreased for others.
• Stock-based compensation (SBC) seems to have reached very significant levels over the years for all companies. Since it is a non-
cash expense it is contributing to positive FCFF despite negative EBITDA margins through the years. Average SBC (as a % of
revenue) appears to be more prevalent in the newly listed companies with about 15%-20% of revenues being expensed in stock
compensation.
• If the said compensation were to be given in cash, there may not be any free cash flows!
Source: Our Analysis and S&P Capital IQ
Private and Confidential September 23, 2021
4.
Valuation Matrix
for New age
companies
a. Unit Economics
Should we rely on Gross Metrics or Unit Economics?
1. Monthly Website Traffic: The more people hear 1. Customer Acquisition Cost: is the cost
about your product, the more likely they are to check associated in convincing per customer to buy a
out your web page. product/ service.
1.6
13 1.50 Amazon (GMV)
Flipkart (GMV)
8 1.00
0.7 0.9
Amazon Revenue
0.3 0.3 0.4
3 0.50
2.4 3.7 7.5 6.2 11.5 15.0 Flipkart Revenue
-12 (1.00)
-17 (1.50)
Source: Private Circle, Economic Times, Barclays
Key Points:
9M FY 2021 Unit Economics (INR) 1. The biggest contributors to the positive unit economics were:
• Higher commission per order
• Lower delivery expense per order
• Lower discounting per order
2. Higher AOV and commission per order were result of changes bought
on by the pandemic, like combined ordering and more orders from
organised players
01 (aa) 2 2+5 01 (ab) * 01 (a) - 5 3. These changes might reverse back after the pandemic induced
restrictions are gone, making the sustainability of this positive unit
economics uncertain.
* - comprises payment gateway charges, support cost, restaurant partner refunds, delivery partner onboarding,
delivery partner insurance, SMS, cash on delivery handling and call masking, among others
Source: Zomato DRHP
Private and Confidential
Customer Lifetime Value (1/3)
• Why CLV?
‒ Generally, startups deploy funds to acquire a customer base. The average acquisition costs and customer retention
rate would be comparable in a like-to-like business model.
‒ Further, CLV along with Revenue/ Cost ratio can be quite useful in comparison of profitability per customer across
business models.
40.0% 62.8% Commission per order 10.7 10.9 11.2 11.5 11.9
(P)
47.1%
20.0% 37.7% A: Total Commission 21.3 32.6 44.8 57.7 59.4
33.9% Revenue (P*Q)
0.0% Customer Retention 78.5% 62.8% 47.1% 37.7% 33.9%
2019 2020 2021 2022 2023 Rate
B: Customer Lifetime 100.2
Annual Retention Rate Revenue
Lifetime Retention Rate
100.0
0.0
Customer Customer Customer Customer
lifetime revenue lifetime Service acquisition cost lifetime value
cost
Size:
• Currently, the number of internet users
in India (~0.6bn) is 2x the size of US
population, giving the tech companies a
much bigger playground to play on
Growth potential:
• With internet penetration in India still
below that of US and China, Indian
market are expected to grow rapidly,
along with a bigger consumer funnel
Internet Users
Consumer Funnel
• Further, combining the under penetrated
1400 1000
1.66x 1.36x 1225 900 ~70% restaurant food market (as a % of
1200 900 800
growth growth overall food) and online food delivery
975 800 720
1000 900 700 585
635 users (as a % of internet users), we are
600 ~23%
800 695
500
looking at 5x size in the next 5 years
585 415
600 400
320 300 235
400
200 135
200 100 “When clubbed together, these size and
0 0 growth potential provides a potential for
India China India China
hefty returns on investment, even to the late
2015 2019 2025P A B C D
stage investor.”
A – Access to Internet B – Active Internet
Users
- Bob van Dijk, CEO Prosus (HoldCo of
C – Online Services Users D – Online Shoppers Naspers) on acquisition of BillDesk by PayU
From a restaurant listing app to a food delivery public company, Zomato has traversed a long was in a new industry
and, along with its key competitors like Swiggy, UberEats (acquired), FoodPanda (acquired) and such, has invested a
lot in creating and expanding the market.
Lets discover the key variables for determining market potential:
Postmates, Others, 8%
Others, 1%
3%
Ele.me,
Grubhub, 27%
16%
DoorDash,
57%
Uber Eats, Meituan,
23% 65%
• Key Questions:
• Can/will a duopoly exist between Zomato and Swiggy, and will they maintain equivalent market share?
• As a public company, how long can Zomato continue the cash burn to acquire new customers?
• Can Zomato maintain customer loyalty through Pro/Gold like programs without deep discounting?
• What other business verticals can Zomato enter (Grocery, Payments, etc.) to build stickiness?
3. Operating margins:
✓ Contribution per order has become positive to INR 23
If we adjust FY21 Advertisement and Sales promotion expense per order of around INR 22, the contribution per order
becomes nil
✓ Lower advertisement costs and employee costs boosts the operating margin, which is 33% for DoorDash and about 25% for
Zomato, down from 67% and 49% respectively.
✓ Newer technologies like drone and automatic vehicle delivery has the potential to lower the delivery cost significantly
If we adjust the un-recovered part of delivery expense per order of around INR 18, the contribution per order jumps by 80%
X Government regulation/ labour laws for gig workers might increase “outsourced service cost”, as certain employee benefits
may have to be provided
X Intense competition might jack-up the discounting or sales promotion expenses, leading to a continued cash burn
Key Questions:
• What will be the long term take rates for the company?
• Is the current structure of positive unit economics sustainable?
• Accordingly, what can be the long term operating margins for the company, can it reach global levels?
Exit Exit
India Food Delivery Multiple - Multiple -
Operating
(US$ Mn) FY 2022 2023 2024 2025 2026 2027 2028 2029 2030 Low High margins:
Market Size 5,873 7,928 10,703 14,449 19,506 26,332 35,549 47,991 64,788 • Moving long
Growth YoY 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% term margins to
15% / 25%
Market Share 44% 44% 44% 44% 44% 44% 44% 44% 44%
GOV 2,584 3,488 4,709 6,357 8,582 11,586 15,641 21,116 28,507
changes the
contribution per
Take Rate 22% 22% 22% 22% 22% 22% 22% 22% 22% share to INR 60
Revenue (food delivery) 568 767 1,036 1,399 1,888 2,549 3,441 4,646 6,271 / 97
Operating Margin -26% -15% -1% -4% 2% 5% 10% 15% 20% 15x 25x
Operating Income (149) (115) (13) (60) 38 127 344 697 1,254 18,814 31,357
Discount rate:
Depreciation 2% 9 12 16 21 28 38 52 70 94
• Moving
Taxes 25% (37) (29) (3) (15) 9 32 86 174 314
After Tax Operating Income (112) (86) (10) (45) 28 96 258 523 941
discounting to
18% / 12%
Depreciation 9 12 16 21 28 38 52 70 94 discounting
Capex 2% 9 12 16 21 28 38 52 70 94 changes the
WC change -10% (57) (20) (27) (36) (49) (66) (89) (120) (163)
contribution per
FCFF (55) (66) 17 (9) 77 162 347 643 1,103
share to INR 63
Time Period 0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 / 98
PV factor 15% 0.93 0.81 0.71 0.61 0.53 0.46 0.40 0.35 0.30 0.30
PV of FCFF (51) (54) 12 (5) 41 75 140 225 336 7,647
Where is my CLV…?
Using the Guideline Public Company Method involves three main phases and numerous steps.
Where is my CLV…?
• As the guideline comparable company approach is only as accurate as inputs, selecting the correct
guideline companies is paramount to the concluded value
“Do the underlying economic forces driving this guideline company match those that drive our
subject company?”
• Since the solutions / services provided by Circle are varied in nature, and finding a perfect comparable would be very difficult
•
Where is my CLV…?
Accordingly, the management chose different companies for different segments:
494.3
54.7x
351.6
39.1x 40.0x
38.0x
185.5
20.6x
18.7x
123.9
93.1
7.9x
53.6 6.5x
26.2
4.5 2.1
Circle Mastercard Visa Adyen Bill.com Shopify Square Bakkt Coinbase Circle Mastercard Visa Adyen Bill.com Shopify Square Bakkt Coinbase
Revenue CAGR (FY 21E-23E) Growth Adjusted EV/ Revenue (FY 21-23E)
177.6%
154.8%
2.1x
Circle Mastercard Visa Adyen Bill.com Shopify Square Bakkt Coinbase Circle Mastercard Visa Adyen Bill.com Shopify Square Bakkt Coinbase
EBITDA Margin FY23E Growth & Margin Adjusted EV/ Revenue FY23E
71.5%
62.2% 63.2%
0.8x
34.5%
0.6x
22.1%
15.5% 0.3x
10.0% 0.2x
7.8% 0.2x 0.2x
0.1x
NMF NMF
Circle Mastercard Visa Adyen Bill.com Shopify Square Bakkt Coinbase Circle Mastercard Visa Adyen Bill.com Shopify Square Bakkt Coinbase
Relative Upside Ratio: Average: 2.4x Relative Upside Ratio: Average: 8.0x
Median: 1.3x Median: 4.0x
Risk Adjusted Ratio: Average: 1.9x 6.1x Risk Adjusted Ratio: Average: 5.1x
Median: 1.1x Median: 3.0x
16.0x
12.5x
3.6x
9.5x
2.7x 2.7x
2.0x 7.1x
Circle Mastercard Visa Adyen Bill.com Shopify Square Bakkt Coinbase Circle Mastercard Visa Adyen Bill.com Shopify Square Bakkt Coinbase
Incremental Risk Adjustment (10% Alpha) Incremental Risk Adjustment (10% Alpha)
The Relative Upside Ratio has been computed between Revenue and Margin/ Long term adjusted Multiple of Circle vis-à-vis the comparable companies
*The expected long-term margin as provided by Management is 35% for Circle. For comparable companies, the margin used is based on the last forecasted data available.
Source: Our Analysis, Circle Investor Presentation, S&P Capital IQ
Private and Confidential
5.
IPO Disclosures
& Storytelling
IPO Disclosures
▪ The number of companies raising funds via IPOs are increasing y-o-y with large number of IPOs lined up for the
coming months, 2021 is a record year for IPOs in India.
▪ The most important document filed by an Indian company to SEBI when it intends to raise money from public is the
Draft Red Herring Prospectus (DRHP). Similarly, in USA Form S-1 must be filed with SEC for raising funds via IPO .
▪ The readability of these disclosures is decreasing given the increasing size of these documents, however, certain
key disclosures one should review apart from financial statements are presented below:
2. Industry Analysis
3. Risk factors
5. Utilization of Proceeds
▪ This section explains the brief description of the company and insights about the operations. As an investor, one
must understand the core services / solutions of the subject business in order to analyze how the company with
perform in said industry/ market.
Business Description
of Zomato
Business Description
of Doordash
▪ We should also have a close look at the emerging organic growth trends, as well as inorganic growth strategy to
understand future business growth opportunities and also capex/ acquisition costs.
Growth Strategy
of Zomato
Opportunities for
Doordash
▪ This section talks about the industry size, historical and projected growth, how the company stands amongst its
competitors and its share in the market. The maturity of the industry and the company’s relative competitive
position is critical to understand how it may evolve in the future.
Industry Section
of Zomato
Industry Section
of Zomato
▪ In this section, a company mentions all possible risks that could impact its operations. Most factors could be
general and routine in nature, but certain risks could be specific to the company which need to be analyzed:
a. External risks: All uncontrollable factors like natural disasters, pandemic, epidemic, economic conditions, change in
regulations, political changes, financial instability, etc. with how they impact the business
b. Internal risks: Specific risks related to the business and industry
c. Risks specific to the offer: Risks related to that IPO like non-payment of dividend, possibility of alternative funding, price and
volume fluctuations of shares
Generic Risks /
External Risks
Company Specific
Risk for Zomato
▪ This section has details such as names, qualifications, designations about directors, promoters and key
management personnel. It may also have information about any criminal cases or that of financial delinquency or
pending litigations against these people.
Management of
Zomato
Management of
Doordash
• Companies announce IPOs for various reasons. Investor should identify what the company intends to do with
the capital it raises through the IPO. Does the company plan to reduce its debt, purchase new assets/
businesses or meet its working capital needs? Are the utilization of proceeds well aimed and defined, or has no
specific objective?
Use of funds by
Zomato
▪ This is one of the most important sections which provides an opinion of the senior executives on the company’s
performance including emerging trends, competition and certain forecast about future performance.
▪ It may also have additional insights on the business model, revenue and cost drivers, Unit Economics etc.
MDA of Zomato
• As the IPO and SPAC euphoria continues, New Age companies have also become quite adventurous in
the ‘Storytelling’…
• Most of these stories have a strong outline (TAM, Downloads, Active Users, Subscriber growth, Unit
Economics etc.), however, certain critical aspects are usually missing (User acquisition cost, User Attrition/
Renewal rates, Cohort etc.)
• Further, in order to fill the gaps and simplify the forecasting process, companies have started sharing
financial projections deep into the future, some even forecasting their next ten years performance!
• This has led potential investors blindly running relative/ comparable analysis using the financial projections
provided in the documents, without applying their own analysis and judgement
Other revenue includes partner development fees & pre-commercialization (manned) fleet operations
Snowflake Cloud-based Snowflake Inc. provides cloud-based data platform internationally. The company’s platform offers Data Cloud, an ecosystem that enables customers to consolidate data
Data Platform into a single source of truth to drive meaningful business insights, build data-driven applications, and share data. Its platform is used by various organizations of various
sizes in a range of industries.
Shopify E-Commerce Shopify Inc., provides a commerce platform and services internationally. The company’s platform provides merchants to run their business in various sales channels,
platform including web and mobile storefronts, physical retail locations, pop-up shops, social media storefronts, native mobile apps, buy buttons, and marketplaces; and enables
to manage products and inventory, process orders and payments, fulfill and ship orders, new buyers and build customer relationships, source products, leverage
analytics and reporting, and access financing. It also sells custom themes and apps, and registration of domain names.
Data Dog SaaS – Datadog, Inc. provides monitoring and analytics platform for developers, information technology operations teams, and business users internationally. The company’s
Analytics SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, log management, and security monitoring to provide real-time
services observability of customers technology stack.
Twilio Inc Cloud-based Twilio Inc., together with its subsidiaries, provides a cloud communications platform that enables developers to build, scale, and operate customer engagement within
communicatio software applications internationally. Its customer engagement platform provides a set of application programming interfaces that handle the higher-level communication
n platform logic needed for nearly every type of customer engagement, as well as enable developers to embed voice, messaging, video, and email capabilities into their
applications..
Nvidia Visual NVIDIA Corporation operates as a visual computing company worldwide. It operates in two segments, Graphics and Compute & Networking. The Graphics segment
Computing offers GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA
and Gaming RTX GPUs for enterprise design; GRID software for cloud-based visual and virtual computing; and automotive platforms for infotainment systems.
Tesla Electric Tesla, Inc. designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems in the United States, China, and
Vehicles and internationally. The company operates in two segments, Automotive, and Energy Generation and Storage. The Automotive segment offers electric vehicles, as well as
Energy sells automotive regulatory credits. The Energy Generation and Storage segment engages in the design, manufacture, installation, sale, and leasing of solar energy
generation and energy storage products, and related services to residential, commercial, and industrial customers and utilities through its website, stores, etc.
Luminar Autonomy Luminar Technologies, Inc. operates as a vehicle sensor and software company for passenger cars and commercial trucks. The company operates in two segments,
Technologies Solutions and Autonomy Solutions and Other Component Sales. The Autonomy Solutions segment designs, manufactures, and sells lidar sensors, and related perception and
Components autonomy software solutions for original equipment manufacturers in the automobile, commercial vehicle, robo-taxi, and other related industries. The Other Component
Sales segment engages in the designing, testing, and consulting of non-standard integrated circuits for government agencies and defense contractors.
TuSimple Autonomous TuSimple Holdings Inc., an autonomous technology company, develops autonomous technology specifically designed for semi-trucks in the United States and
Holdings Technology internationally. It intends to produce a line of purpose-built (Level 4) L4 autonomous semi-trucks for the North American market.
Quantum Designing Quantum Scope Ltd provides planning and designing services for computer systems which integrate computer hardware, software, and communication technologies.
Scope services Quantum Scope Ltd.
Lucid Group EV Lucid Group, Inc. a technology and automotive company, develops electric vehicle (EV) technologies. The company designs, engineers, and builds electric vehicles, EV
Technology powertrains, and battery systems.
3.1x
Average: 1.1x Relative Upside Ratio: Average: 0.6x
Median: 0.8x Median: 0.5x
1.9x
1.9x
1.6x 1.2x
1.1x
0.8x 0.8x 0.7x
0.5x 0.5x
0.4x 0.3x 0.3x 0.3x 0.2x 0.2x 0.2x 0.2x
Aurora Snowflake Shopify Datadog Twilio NVIDIA Tesla Luminar TuSimple Lucid Snowflake Shopify Datadog Twilio NVIDIA Tesla Luminar TuSimple Lucid
Tech Tech
The Relative Upside Ratio has been computed between Revenue and Margin/ Long term adjusted Multiple of Aurora vis-à-vis the comparable companies
*The expected margin in 2027 s 9.5% for Aurora. For comparable companies, the margin used is based on the last forecasted data available (2023 for Snowflake, Datadog and Twilio, 2025 for others).
Source: Our Analysis, Aurora Investor Presentation, S&P Capital IQ
Private and Confidential
Thank you
Contributors: CONTACTS
1. Aviral Jain, Managing Director, Duff & Phelps, a Kroll business
Aviral Jain, CFA
2. Aayushi Gupta, Consultant, Duff & Phelps, a Kroll business
Managing Director
3. Tanvi Thareja, Trainee, Duff & Phelps, a Kroll business
M +91 99100 21127
4. Keshav Jha, Student at FMS
Aviral.Jain@duffandphelps.com
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