IPO frenzy this week nets billions for venture-capital backers

[NEW YORK] Billions of dollars could be on the way to Sand Hill Road this week, home base for Silicon Valley's venture-capital elite, after a string of initial public offerings (IPOs).

Venture firms netted handsome returns on paper for their early investments.

While the firms mostly won't be able to sell their shares until lockup periods expire, proceeds from exits could provide the cash for them to fund the next generation of startups.

Snowflake Inc, which was trading at a US$65 billion valuation on Friday, has provided the biggest windfall so far for its early shareholders. Sutter Hill Ventures, which invested when the cloud-computing business was a nascent startup, owned more than 20 per cent of the company's Class B shares going into the IPO, according to a filing. Its 41.9 million shares are now worth more than US$10 billion.

Sutter Hill's windfall wasn't happenstance. Managing director Mike Speiser also served as Snowflake's first chief executive officer.

Venture firms Sequoia Capital, Altimeter Partners Fund, Redpoint Ventures and multifamily office Iconiq Strategic Partners, also own Snowflake stakes worth billions, filings showed.

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GAMING VICTORY

Gaming technology company Unity Software Inc, raised US$1.3 billion in an IPO and rose 31 per cent in its trading debut on Friday, giving it a market value of US$18 billion.

Unity provided a big return for early investor Sequoia, which owns 57.5 million shares, worth US$3.9 billion. Private equity firm Silver Lake owns 43.3 million shares worth almost US$3 billion.

Firms also benefitted from smaller technology IPOs this week, JFrog and Sumo Logic.

Gemini Israel Ventures, Sapphire Ventures and Insight Partners were the largest JFrog shareholders. Greylock Partners, Sapphire Ventures and Accel had the largest Sumo Logic stakes.

Companies are going ahead with IPOs while the market is strong, particularly for technology stocks, venture capitalists said.

"It's a little bit of all the stars aligning," said Jai Das, managing director at Sapphire Ventures. "There are a lot of companies with significant revenue run rate that can go public." And Mr Das added, "There is a demand."

Carl Eschenbach, a partner at Sequoia, said the market for IPOs is "very robust" now.

"There's a lot of capital sitting on the sidelines," he said.

Enterprise technology companies find that being a public company enhances their credibility when selling to new customers, he said.

MORE RETURNS

Venture capital firms stand to gain from returns from deals involving startups merging with special purpose acquisition companies, also known as SPACs or blank-check companies.

This week, real-estate startup Opendoor agreed to go public by merging with a blank-check company led by Social Capital's Chamath Palihapitiya. Opendoor's backers include GGV Capital, Norwest Venture Partners and SoftBank Vision Fund.

Venture firm Founders Fund, co-founded by Peter Thiel, will also be a beneficiary of direct listings on deck this month. It backs both Palantir Technologies Inc. and workplace software company Asana, which is backed by venture capital firm Benchmark.

Palantir is planning to go public via a direct listing on Sept 29 that will be unusual because it will impose a partial lockup period - though less strict than in a traditional IPO. Asana is set for a direct listing the following day that won't include such restrictions.

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