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Is Wall Avenue shedding its technical pleasure?

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In recent months, the IPO market has made it clear that some public investors have been willing to pay more for growth-oriented technology stocks than private investors. We saw that in both strong tech IPO prices – the value that companies put on debut – and in resulting ratings on the first daythat were often higher.

One way to think about how far public ratings have gone up for technology startups, especially companies with a software core in 2020, is to ask yourself how many times you've heard of an IPO this year. Maybe just once? Maximum? (You can catch up on the 2020 IPO performance Hereif you have to.)

The buzz for going public showed a gap between what many venture capitalists and private investors were paying for tech stocks and what the public market was doing with its own valuation calculations. Insurtech startup Hippo's $ 150 million private round from July is a good example. The company was valued at $ 1.5 billion in the round, a significant increase from its previous private valuation. But if we valued it like the then newly listed lemonade, Hippo was reasonably priced at the time.

This week the concept is that private investors are more conservative than public investors in certain cases (around eight-digit private rounds) It did so this year on valuations even more bullish than public investor treatment of IPOsto be clear) took a thing like most Big tech companies lost ground, SaaS shares were sold, and other tech firms struggled keep up with investor excitement.

Not just Tech companies have given in, but as I write to you this Friday afternoon, American stock markets were on their way to their worst week since March. CNBC reported, "Led by big tech stocks."

A change in the wind? Perhaps.

Notably, it was only in September that VCs had resigned themselves to raising startup ratings through the public markets' endless optimism for related businesses. Canaan's Maha Ibrahim told me during Disrupt 2020 It was a time when VCs had to “play the game” and pay for startups as long as companies “were rewarded for their high growth in public markets, like Snowflake was then”. A16z's David Ulevitch agreed.

Maybe this is dynamic change when stocks fall. In this case, startup ratings could drop massively along with the more exotic areas of startup-related funding. For example, the SPAC boom may subside. Chatting with Hippo's CEO Assaf Wand this week, he noted that SPACs were a market response to the public-private valuation gap, an accelerator bridge to help startups get out there while demand for theirs Equity was high.

Without the same ardent demand for growth and risk, SPACs could cool off. So could private reviews that the The hottest startups are a given. Whether what we're feeling in the wind this week is a hiccup or a turning point is not clear. But the public technical stock market fever may have broken at a somewhat uncomfortable time for Airbnb, Coinbase, DoorDash and others not quite IPOs yet.

Market notes

This week where I live it started snowing and put a somewhat sad cap on an otherwise turbulent week. Still! There is a lot to do in our world. Here are our week's market notes:

Remember when we I looked at how quickly startups grew in the third quarter? Another company I covered earlier, Drift, wrote in. The Boston-based marketing software company reported to The Exchange that it grew more than 50% in the third quarter from the year-ago quarter, with its CEO in June and the third quarter added were the strongest monthly and three-month periods in its history.
The fintech boom continued DriveWealth raises nearly $ 57 million this week, where the startup is another API driven game. It comes as no surprise that a company is doing well between the two major startup trends of the year. DriveWealth is helping other fintech companies give users access to the American stock markets. Alpaca, which also recently raisedworks in a similar way.

There were two IPOs this week that were important to us. MediaAlpha's debut, which brought the advertising and insurtech company an IPO of $ 19 per share, quickly exploded out the window. Today the company is worth nearly $ 38 per share. Why? Steve Yi, CEO of MediaAlpha, said on his IPO that he chose the current moment because the public markets had received an appreciation for Insurtech. His share price growth appears to be in line.

Until we look at root to some extent. Root, a new insurer focused on the automotive sector, Price at $ 27 when it debuted this week, $ 2 above the upper end of its range. The company is now worth less than $ 24 per share. Regardless of which wave MediaAlpha caught, Root seems to have missed.

I honestly don't know what to make of the difference between the two debuts but please email me if you know (you can just reply to this email and I'll get your message) .

Separately, I spoke to Root CEO Alex Timm after his company went public. The executive said Root made plans to go public a year ago and could not control market noise at the time of his debut. Timm pointed out that the amount of capital Root added to his coffers – north of $ 1 billion – is a profit. I asked how the company intends not to screw up its newly swollen accounts, to which Timm said his company will continue to focus on its core auto insurance opportunity.

Oh, and Root is based in Ohio. I asked what his debut could mean for startups in the Midwest. Timm was positive, saying that the IPO could highlight that there are many bright minds and GDP in the middle of the country, even if venture capital amounts remain underdeveloped for the region.

I know you're fed up with the revenue by now, but Five9 did something other companies have been trying to do, which is: Exceeded expectations and strengthened the forward leadership. Their stocks went up. The exchange phoned the call center software company to talk about it last acquisition and result. How did it hit expectations so low? By selling a product the market needed at the time of COVID-19's launch, accelerating digital transformation in a broader sense, and increasing e-commerce spending enabling more customer care on phone lines, it said. In other words, a lot at once.
Five9 raised a number of convertibles earlier this year, despite having an adjusted profit. I asked his CEO Rowan Trollope how he would invest cash to take advantage of the market's tailwind without spending too much. He said the company reviews sales performance very regularly and helps adjust new expenses quickly. It seems to work.
What else? Check out big, important rounds this week by SimilarWeb, PrimaryBid and Eightfold, a company I've known for a while. Oh, and I covered Series B from the Wanderlust Group and Teampays Serie A expansionthat were great fun.

Miscellaneous and miscellaneous

What is going on in the world of venture debt when VC gets back in shape? We dug in.
For the europhiles among us Here's what's up with the VC documents of the continent.
Here are 10 favorites from the last Techstars demo days.
And here is some math about databricksafter rumored to have an IPO target for the first half of 2021.
We're running out of space this week, but I've got a few fun things in the tank for later, including a Capital G investor's takeover of RPA, a call to Zapier's CEO about no-code / low-code growth, and notes of A developer ecosystem chat with Dell Capital. More on that when the news settles down.

Stay safe and vote.

Alex

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