Contents

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

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

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

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

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

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

Methodology

771 IPO 329 IPO

Exits
Exits 187 IPO Exits
Recorded
Recorded Recorded from
from HKSE,
from NYSE, and SEC filings
Preqin NASDAQ

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.

1
PE/VC-backed IPOs Overview
Fig. 1: IPOs on NYSE, NASDAQ, HKSE from 2017 – 2019 by Industry Segment

30
Number of Firms

20

10

0
2017 2018 2019
Pharmaceuticals Biotechnology Software Internet
Financial Services Medical Instruments Retail Education / Training
Consumer Products Medical Devices IT Security Telecoms
Oil & Gas Healthcare Media Healthcare IT
Food Electronics Utilities Shipping
Hardware Leisure Transportation Logistics
Semiconductors Manufacturing Business Services Construction

Graphs & Analysis: SVCA

Using Raw Data Compiled from Preqin, SEC Filings, Yahoo Finance

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.

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.
Dr Finian Tan
Chairman
Vickers Venture Partners

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

1000%
Reaches >10,000%
900%
800%
700%
600% S&P 500 2019: 31%

500%
400% S&P 500 2018: 14%

300%
S&P 500 2017: 13%
200%
100%
0%
-100%

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%.

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

4000 Reaches USD 9826

3500 Million
3000
USD Million

2500
2000
1500
1000
500
0

Media

Mining

Outsourcing
Biotechnology
Industrial

Hardware

Internet

Electronics

Financial Services
Healthcare

Telecoms
Education / Training
Logistics

Utilities

Leisure
Healthcare IT

Chemicals
Business Services

Retail

Food
Semiconductors
Medical Devices

Advertising
Manufacturing
Oil & Gas

Renewable Energy

Shipping

Software

IT Security

Clean Technology

Insurance
IT Infrastructure

Aerospace
Transportation

Consumer Products

Pharmaceuticals
Medical Instruments

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

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.

4
 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

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

400%

300%

200%

100%

0%
Pre-IPO to IPO
Unicorn (0 - 9 Months)
Non-Unicorn (9 Months - 2 Years)
Unicorn (> 4 Years)
Pre-IPO to 6 Months Post-IPO
Non-Unicorn (0 - 9 Months) Unicorn (9 Months - 2 Years)
Unicorn (2 Years - 4 Years) Non-Unicorn (2 Years - 4 Years)
Non-Unicorn (> 4 Years)

Graphs & Analysis: SVCA

Using Raw Data Compiled from Preqin, SEC Filings, Yahoo Finance

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

0 - 9 Months 9 Months - 2 Years 2 Years - 4 Years > 4 Years
Round to IPO
Average Increase
IPO to 6 Months 7% 98% 46% 50%
Post-IPO

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.

Srividya Gopalakrishnan There are several uncertainties at this point of time.

Managing Director and
Southeast Asia Leader
Valuation Advisory
Duff & Phelps

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

100%

90%

80%

70%
Percent of Population

60%

50%

40%

30%

20%

10%

0%
Unicorn Non-Unicorn
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

Graphs & Analysis: SVCA

Using Raw Data Compiled from Preqin, SEC Filings, Yahoo Finance

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.

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
Mohamed Nasser Ismail, important elements that build investor confidence and ultimately shape
Global Head of Equity companies to become more strategic and sustainable in the long run.
Capital Markets, SGX

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

250.00%
Without
Zoom
200.00%

Without
Without
150.00% iQiyi
Beyond
Meat
100.00%

50.00%

0.00%
<=100 100-500 500-1000 >1 Billion Funding

Graphs & Analysis: SVCA

Using Raw Data Compiled from Preqin, SEC Filings, Yahoo Finance

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.

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
Jixun Foo burned money for all the right reasons and was incredibly disciplined in its
Managing Partner spending. Going through a tough time like this will help startups to focus and be
more responsible in their spending.
GGV Capital

8
Concluding Commentary
Fig. 8: Number of IPOs in US Markets

600

486
500

406
400

300 275
226 222
206 199 213
192
200 170 160 159
154
125 128
105
100 84 71
70 63
31

0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

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.

9
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

10
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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