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The State of the Private Markets: 2020
EquityZen's CEO Atish Davda shares his views on the evolving private market landscape and opportunit...
Yesterday, Atlassian announced that it would be buying Loom for $975M in cash.
With a last round valuation of $1.5 billion, was this a bad exit?
Let's take a look at who wins, who loses, and who breaks even.
🌱 Early 2016: Series Seed 2 Preferred ($0.15/sh, $622K)
- Best guess: Friends & Fam, Angels
🌱 Oct 2016: Series Seed 1 Preferred ($0.37/sh, $3.1M)
- First VC $$ from 1517 Fund
☘ Nov 2018: Series A Preferred ($0.74/sh, $11M)
- Showtime! Ilya Fushman at Kleiner Perkins leads the round and takes a Board Seat
🌳 Oct 2019: Series B Preferred ($2.08/sh, $28M)
- Andrew Reed at Sequoia Capital leads the round and takes a Board Seat
⏸ Quick intermission.
From corporate filings, the Board is now 5 people: 3 for Common Stock (likely the 3 co-founders of Loom: Vinay Hiremath, Joe Thomas, Shahed K.), 1 on behalf of Series A Preferred (Kleiner), and 1 on behalf of Series B Preferred (Sequoia). This will matter later.
⏯ Alright, onwards:
🌵 May 2020: Series B+ Preferred ($3.94/sh, $23.5M)
- 2x price increase, 2 months into COVID? Makes sense given the movement to remote work.
🌲 May 2021: Series C Preferred ($16.19/sh, $130M)
- ZIRP time! Andreessen Horowitz comes in with a major valuation step-up (to $1.5B). 🚩 a16z does *not* get a board seat.
📜 Let's now take a quick look at the cap table:
Common Stock: ~45M shares, 45%
Seed 1: 4.3M shares, 4%
Seed 2: 8.4M shares, 8%
Series A: 14.4M shares, 15%
Series B: 13.5M shares, 14%
Series B+: 5.9M shares, 6%
Series C: 8M shares, 8%
👏 Kudos to the Loom team for:
💧Limiting liquidation preference (all Preferred Stock has standard 1x pref.)
💼 Board Control (founders have 3 of the 5 seats).
🔻Then comes 2022: war + inflation + tech plunges.
🌅 But, it's always darkest before the dawn.
⏩ Fast-forward to today. BAM! A $975M sale.
👍 Why this exit was a good one:
#1 Comparable transactions
At EquityZen we've seen a ~45% discount on secondary transactions recently. Loom sold the whole pie (not just a slice), at a 35% discount to their 2021 round.
#2 Great returns for *almost* all their investors.
- Seed 1: 64x
- Seed 2: 25x
- Series A: 12.5x
- Series B: 4.5x
- Series B+: 2.3x
- Series C: 1.0x
#3 $400M for founders + current/former employees (#tendies).
Assume ~10% of the total proceeds (~$100M) went to current and former employees (do you call them Loomers? Loominites? Loomineers? okay i'm done). That means $300M for the 3 founders. 💰
Corporate governance.
When the founders control the Board, they can say "Yes" to the $975M dress 👗. When you FOMO pump $130M into the company at the market peak of '21 and don't get a board seat (which is what a16z did), then, in the wise words of the Hamilton musical, "You don't have the votes" 🎶
But, because of a 1x liquidation preference, a16z still gets its money back (rather than taking a 33% loss).
🏁 Big win for the founders, current/former employees, and almost all investors. What do you think?
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