Start-Up
Hervé Lebret
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A final post (for now) about the data about 600 (former) startups. So what have they become today in April 2020?

First a quick point of caution: I counted some companies twice, because I had looked at their equity strutcure at different points in time: Alibaba had two IPOs in 2007 in HK and 2014 in the USA, Esperion had 2 filings in 2000 and 2013. This is not a big deal, except if you count Alibaba’s value twice!

So out of the about 600 former startups, I found that

– 20 were still private (they may have recently filed for IPOs though)

– 12 were private again after an IPO

– 13 had stopped their activity (often through bankruptcy)

– 225 had been acquired or merged with another company (Merger and acquisitions – M&As)

– 331 were still public.

So let us have a closer look at M&As and public companies:

On the M&A side, the main acquisition value comes from biotech, with a $5B average value whereas software or internet is a little les below $3B.

On the public side, I will let you discover depending on your interest about, given the field, the number of companies, employees, cumulative market capitalizations, sales, profits, then age of companies and current average price to sales (PS), price to earnings (PE) and an interesting personal metrics, price ot employees in $M (Pemp).

I just read Biotech IPOs Start to Show Some Modest Signs of Life from Xconomy. It’s an interesting article because it focuses on Biotech, a field that many people consider as very different from other high-tech start-ups such as Internet, Software or IT in general. The general idea is that it takes much longer to succeed in biotech. You should read the article if biotech is of interest for you and I will not comment it more than mentioning that the good news is that there have been recent biotech filings and IPOs, the less good news being that the market capitalizations are not huge.

What I am more interested in is updating my regular analysis of start-up data (I have now 131 start-ups; see my latest analysis in March 2012 for example with 116 companies) and see how biotech behaves. Here is the synthesis (if you are interested the detailed list is provided at the end).

So what do I see as specific to biotech start-ups? First it does not take them longer to go public. 8 years vs. an average of 7 years. The difference is not in the exit time. They raise $98M on average, but this does not look so special either. But, and here is the but, their sales are only $11M when they go public. So, it takes them much longer to reach revenues. But it does not prevent them from going public (or even be acquired when they begin to have good results in clinical trials).

Another specific element is about founders. The founders’ average age is 41 (similar to medtech and semiconductor) whereas it is 35 on average. Why is that? because many founders are established, recognized university professors. Often times, they do not work full-time in the start-up but have a role of chief scientist. Indeed, the ownership of founders in the start-up is smaller than average (8% vs. 15%).

I should also add that the founders/employee shares ownership is much smaller too (25% vs. 40%) and the reasons are manyfold:

– founders have fewer shares as I just mentioned

– investors have more equity (50% vs. 45%)

– IPO shares are higher (25% vs. 16%). This comes from the fact (I think) that in order to raise the same amount of money, it is more dilutive for a company with less revenue…

– I did not mention another statistical element, which is they have fewer employees. The detailed table below imples about 100 employees (and you may see many of them have even less than 50 or 20 employees). This induces a smaller amount of stock options… (On average my 130 companies have 500 employees when they go public).

I thought this data was of some interest. Please react or comment!

Appendix: detailed data (notice that I am missing the Amgen data)

click on table to enlarge

I noticed at least 4 IPO filings this month, not bad. These are Audience, Infoblox, Millennial Media and most important to me as a European citizen, AVG Technologies. European filings in the USA are sufficiently rare to be noticed, and this time the company has Czech origins. After discussing AVG, I will show you an update of my start-ups data coming from these filings.

AVG did not experience the typical start-up process. Indeed the founders sold their shares to a private equity group in 2001, ten years after the incorporation. The investors then grew the company and attracted new investors including Intel Capital, TA Associates as well as a Polish fund. You may know about AVG, I am using it as a free anti-virus but I did not know it was a European start-up…

Click on picture to enlarge

The revenue growth is quite impressive as you can see in the cap. table (about $150M in 2010 from $100M in 2008). I found a 2000 presentation where the founder gave the facts and figures for 1996-2000. Then the revenues were respectively 17M and 55M Czech Korunas. One Krona was about €0.03, which means in the €0.5-1.5M. Not a bad growth at all. Why did the founders sell, I do not know and I am not even sure what they do today. They do not seem to be role models in Brno. Tomas Hofer seems to be active in another start-up however. If someone has more information on the founders, please comment or contact me.

Tomas Hofer

You can visualize the other cap. tables in my full data document. I do not have much to say about them, but I have updated my stats in the tables which follow, including new data on the amount of VC money raised. I also did a new classification in addition to geography and fields: years of incorporation.

Click on picture to access full pdf data

Following a recent post on the age of founders, I just did a more systematic analysis on the topic and at the same time analyzed more elements on the cap. table of many companies. I had 47 companies in my previous post. Here I just have 100!

The two tables give the founders’ age, the number of years from foundation to IPO and the founders’ remaining equity at IPO by field and geography.

Now if you want to have a look at the full record, just click on the next picture, you will get a 107-page pdf with all data. But please be aware of some of the following difficulties. All this is best effort! The cap. tables are subject to mistakes and comparisons are tough to make. For example:

– Founders do not always share equally the initial stake.

– There is no real definition of founders but the group of people who recognize themselves as such.

– ESOP reserved for future grants is a quite artificial part of the overall picture.

– When age was not available, a indirect measure was to consider a BS is obtained at age 22.

– Directors include independant directors only, not the investors.

– Finally not all companies went public, some were acquired and some filed but did not go public (yet)

Is there anything worth noticing? Well Biotech/Medtech founders are the oldest whereas SW and Internet entrepreneurs are the youngest. Surprising? Not really, but remember, these are not statistically valid data, this is just a compilation…

Going through the higher and higher number of IPO filings, I was suprised to find Wozniak’s names among the officers of one the filing companies. Steve Wozniak, Apple co-founder, is the chief scientist of Fusion-io, a Salt Lake City start-up which has raised more than $100M with NEA and LightSpeed and made more than $30M in revenues in 2010.

Wozniak is neither a founder nor apparently a big shareholder. At least the S-1 filing does not mention his stake, which means that he has less than 5% of the company. My usual cap. table shows typical numbers. The two founders remain with 6.1 and 4.7% each, investors have about 50% of the company and the ESOP is 20% (25% if I include available options for future grants). All this assumes the company goes public and includes the future IPO shares.

One detail I will focus on in a post to come is equity given to independant board members (VCs are on the board but usually do not own equity personally). Here Ray Bingham and Dana Evan own 0.03% of the company and less than 1% of the founders shares.

As you noticed recently if you read this blog, IPO filings are piling up. The latest one (I heard of) is Apache Design Solutions and it is very interesting for me because the company belongs the the field of Electronic Design Automation (EDA) which I covered as a full chapter of my book and I follow from time to time the EDA domain on this blog.

EDA is an interestign market because it has reach maturity so you can look at its dynamics over 30 years. I will come back on it at the end of the post. But first, Apache. John Cooley on his DeepChip web site has the best possible description of the company: A brief history of Apache and its IPO.

So here is my usual cap. table. It took Apache 10 years to file despite the fact that the company has been profitable for many years. Not very famous investors (though Intel and Bechtolsheim are not bad!), solid revenues and profits. It shows how much the tech sector has suffered. Such companies would have been public easily ten years ago. In fact,a s Cooley notices, tehre has not been any EDA IPO since 2001.

So what about the EDA market? The last EDA IPO in 2001 was… Magma. I will just let you look at the market data and judge about the market.

Figure 1 – EDA Market and Players 1983, – 2010.

Figure 2 – EDA Market and Players, 1983 – 2010.

Table 1 – EDA Market and Players, 1983 – 2010 (Revenues in $M).

NB: the 2010 figures for Total and Magam are assumptions (as they are not known yet).

Biotech is a strange world for me. I am an IT guy and I have never really understood much about biology. The biotech start-ups are also very different from IT companies. It is well-known that it takes them years to reach revenues with products (not R&D revenue), not to say profitability (just like the semiconductor industry). It does not prevent them from going public early (just as Internet start-ups did in the late 90s!). So it is a strange mix of features of hardware and software companies.

In a series of documents on the biotech history, I could find the following quote related to Genentech: “Late in 1979, Tom Perkins pushed the idea of a public offering. Although the technology was young, and we were early on in the development of products, there was enough interest in the public to get a public offering done. This was a foreign concept at the time. While we had a couple million dollars in revenue–! think it was $3.5 million in revenues in 1979-there were no product revenues or profits generated from products. Whether or not you could take a company public that didn t have product revenue, didn t have commercialized products, and didn t have significant profits, was an unknown. In the mid to late seventies, if companies went public, they had revenues and earnings. You d have at least $10 million in revenues and at least a million dollars in profit, then maybe you could have one of the small high-tech underwriters take you public.”

Secondly, the founders are seldom the typical nerds with some great business vision (Gates, Jobs, Brin/Page, Zuckerberg) but often university professors/researchers. They do not have to quit their academic position and often take the title of chief scientist. (This also happens in the hardware academic spin-offs, with Atheros as an example I mentioned in a recent post).

As a first illustration of all this, I will just show some data about Chiron. My next post will be about Genzyme and I will conclude with general elements in the 3rd and final post.

Chiron was one of the early start-ups in biotech. It was founded in August 1981 and went public in May 1983… 2.2 years! It had three founders Edward Penhoet, William Rutter and Pablo Valenzuela who were respectively 41, 54 and 40 years old when Chiron was founded. Not kids in their early twenties! Their activity at time of foundation was professor at Berkeley, professor at UCSF, researcher at UCSF.

Here is my usual cap. table followed by the equity pie. Chiron at $1.5M and $0.8M in revenue in 1983 and 1982, there was no profit but a loss of $2.2M in 83 and $0.8M in 1982…

Chiron was bought in 2006 by Novartis and it is not the only biotech start-up acquired by an European corporation as we will see soon.

Next post: Genzyme.

After my recent posts about Israel and high-tech innovation, I discovered I did know not very well the Check Point story. Start-up Nation did not provide much info and though you can find a lot on Wikipedia or on the Facts@Glance of the company. for example, I became a little frustrated when I discovered I could not find much about the company early days and IPO. I even had to buy the IPO filing through the SEC as the document is not public on the web and Check Point could not help me with such info.

There are a couple of very interesting points:

– the three founders had equal shareholding at foundation (and afer Check Point went public).

– Gil Shwed, one of the co-founders, is still the chairman and CEO. Another unexperienced and young entrepreneur who grew his baby through adulthood.

– Many women in the management of the company, Deborah Triant at the time of IPO, but even today Dorit Dor, Tal Payne and Juliette Sultan as the executive team page shows. (This may have to be linked to Israel culture again).

Gil Schwed, Shlomo Kramer ,Marius Nacht, the 3 co-founders and

Deborah Triant (from the early web sites of Check Point)

Now the usual cap. table that I could build from the IPO filing and the shareholding pies at the end of the post.

– What is interesting is that Check Point did not raise a lot of money, mostly $600k from BRM in 1993. There were also some loans ($400k) and R&D ($160k) from BRM also which do not appear in the shareholding.

– The American VCs (Venrock and USVP) bought shares from BRM in a secondary financing, so there was no new money for Check Point.

– Check Point issued 3M new shares at IPO and existing shareholders (BRM and the 3 co-founders) sold 1.2M shares.

– Not the least impressive, it took the company 3 years only to go public and its 1995 and 1996 numbers are already impressive.

As usual, I hope this does not include too many inaccuracies or mistakes…