Unicorn Births Outpace IPOs in Bay Area

October 16, 2018

More venture-backed Bay Area companies have gone public in 2018 great numbers, but it has done little to cull the unicorn backlog.

"The unicorn class is finally graduating this year but more are being minted in the meanwhile," said Matthew Kennedy, an analyst at Renaissance Capital, an investment firm that manages exchange-traded funds made up of new IPO stocks. "The pipeline is full. At one point we counted more than 100 unicorns and we certainly haven’t run out of them."

Only eight of the Bay Area's unicorns have gone public this year. They are include Zscaler Inc. (NASDAQ:ZS); Bloom Energy Corp. (NYSE:BE), DocuSign Inc. (NASDAQ:DOCU), Eventbrite Inc. (NYSE:EB), Dropbox Inc. (NASDAQ:DBX), SurveyMonkey parent SVMK Inc. (NASDAQ:SVMK), Anaplan Inc. (NYSE:PLAN) and Nio Inc. (NYSE:NIO).

Meanwhile, there have been three times as many new unicorns created, with two of them actually raising two rounds of funding each in 2018 that more than doubled their previous valuations. The accompanying photo gallery includes the details on all of them.

Not counted in those totals are companies that weren't unicorns before their IPOs but boasted market capitalization of $1 billion or more in their Wall Street debuts. These include Elastic N.V. (NYSE:ESTC), Zuora Inc. (NYSE:ZUO), Upwork Inc. (NASDAQ:UPWK) and Guardant Health Inc. (NASDAQ:GH).

Another company that hit a unicorn valuation this year didn't get there in its IPO. ARMO Biosciences Inc. was only figured to be worth about $500 million when it went public in January, but Eli Lily & Co. jumped that valuation to $1.5 billion when it acquired the company just months later, in May.

October's stock market turbulence doesn't appear to have fazed venture or public investors yet. IPOs from Anaplan and cancer biotech Allogene Inc. both topped their targets and four of this year's new Bay Area unicorns were born in the past two weeks.

How long that can continue will likely be decided when we find out how much longer the very long market boom that followed the financial crisis of 2008 and 2009 will last. That has been a prime contributor to this year's IPO boom.

But it won't last forever, so there will likely be some lowered valuations at some point in the future. Nothing goes up forever.

Among the new 24 unicorns are:

Automation Anywhere, $1.8 billion:  This San Jose-based software automation business is certainly not an overnight success, getting to its unicorn valuation 15 years after it was founded as Tetlys Solutions LLC.  The leap came in one of the largest Series A tech funding rounds in history, a $250 million funding on July 2 led by New Enterprise Associates (NEA) and Goldman Sachs Growth Equity, General Atlantic, World Innovation Lab (WiL) also participated.

One Medical, $1.5 billion:  This San Francisco concierge-style primary care network founded by Tom Lee became a unicorn on August 22 in a $350 milion investment from The Carlyle Group.  Previous investors include Benchmark Capital,l Google Ventures and JP Morgan.