VCs Are Safe From Falling Unicorn Valuations by Adley Bowden, PitchBook
Several months ago, the headline and purpose of this story would have been to praise the most prolific unicorn investors. However, times and valuations have shifted and the venture market is wondering where the exposure is sitting, how this is going to hit venture returns and, finally, if this will chase the ‘tourists’ away.
To achieve a big picture perspective of overall exposure, we turn to our data on the 160 unicorns worldwide. Below, we put together a couple of interesting tables to show the investors that have led or participated in the most unicorn rounds ranging from seed to late stage.
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*Note: the companies included in this analysis are the still-private, VC-backed unicorns as of March 28, 2016.
Based on the public mutual fund valuations of unicorns, it appears that only the latest round (or two) is currently going into the red because of the recent decline in value. So to more accurately understand who’s most negatively exposed to unicorn valuation drops, we must focus on the leading and participating investors in the most recent rounds raised by unicorns.
The tables are somewhat different—mainly because there is a much higher number of non-traditional venture investors in the ‘most recent round’ tables. So, when people talk about the popping of the bubble and the potential hit to venture capital (although we think it’s more a pause), it’s noteworthy that the firms themselves are not actually the most exposed. They have largely been the early backers of these unicorns and are sitting on extremely positive returns, even if some of their later follow-ons do suffer.
Unsurprisingly, those most exposed to the valuation drops shown by these lists are the ‘tourists’ of the late stage variety. Core venture capital will likely slip through this current period with unicorn returns largely intact. As these late-stage firms are also mainly buy-and-hold investors with terms often working in their favor, it’s probably a little premature to pass judgement on how they will view these investments.