A unicorn in the tech world is a company that is valued over $1 billion.
With the news of unicorns looking for additional funding in the public markets, I breakdown 3 that have caught my attention.
The popular music streaming services which have a freemium ad supported business model, have filed for an IPO with a target of raising $1billion. Spotify has 159 million active users (monthly) with reach across over 60 countries.
A typical IPO involves investments banks being hired as a sales force for attracting institutional investors, building demand which then determines the initial opening price.
However Spotify is skipping this step (saving 100’s of millions of dollars) and instead performing a ‘direct listing’ which allow for existing shareholders to be apart of the first wave of transactions. This leads to ‘the market’ deciding on the price of the first shares being exchanged leading to higher price per share fluctuations.
Historical private market trading has the company estimated to be worth approximately $23.4 billion. It will be interesting to see how big the fluctuations will be, and how long it will take before the price stablizes.
With over 500 million register users, the cloud storage service has done a wonderful job turning their users into their unpaid sales and marketing team. This is through a double-sided referral program to get more storage and the focus on making the file storage and sharing tech piss easy.
Although they are not profitable just yet according to GAAP standards (disclosure, recognition, measurement and presentation), Dropbox’s revenues are quickly catching up to their operational costs. This is due to continuing efforts on penetrating the enterprise market and converting those on free accounts to paid subscriptions.
With a valuation at approximately the $10 billion mark from a total of $600 million of capital raised, Dropbox is aiming for a $500 million infusion of cash through this IPO as they look to list as soon as March this year (2018).
How will Dropbox perform? I see their challenge in competing against established tech giants, given how narrow their service offering is (cloud storage) within such a crowded industry. How long can they continue to innovate within their vertical before needing to branch out into other products?
Telegram is a messaging services that combines the speed of Whatsapp with the transience of Snapchat and throws in some advanced security measures, have taken a different route to funding. The company uses open source technology providing an public API for developers to create their own client to run the service for over 100 million of their users.
The Telegram team has jumped on the ICO (initial coin offering) bandwagon raising over $850 million pre-ico, which will go towards developing their own blockchain technology. Exactly what’s it for? You’ll need to read the white paper yourself. The tldr is:
- More transactions per second
- File storage tech that can be anonymous and censorship resistant
Worthy investment? I’m a little sceptical in ICOs in general, but great to see interest in blockchain technology.