Many Recently Public Companies Worth Less Than The Private Capital They Raised

Many venture-backed companies that went public last year have created little value beyond the capital invested in them. Some are even worth less than the capital they raised.

That’s the finding from our review of valuations for recently public companies that were among the largest recipients of venture funding. Most are companies that took the SPAC route to market when mergers with blank-check acquirers were all the rage last year.

For our sample set, we looked at current enterprise values for companies that were prodigious private fundraisers. In addition to venture capital, many also raised large sums through PIPE investments that were included in SPAC transactions.

Some of the standouts from our survey include:

• Metromile: The pay-per-mile auto insurance provider raised $290 million in venture funding and $170 million through a PIPE financing prior to completing a merger with a blank-check acquirer last February. Its recent enterprise value1 was negative $4 million.
• View: The developer of “smart glass” for commercial buildings raised around $1.7 billion in venture funding and another $300 million in PIPE financing. Its latest enterprise value: $34 million.
• 23andMe: The provider of consumer genetic tests and genetic research raised around $860 million in known venture funding, plus another $250 million in PIPE financing. Its recent enterprise value of $1.39 billion is a bit higher than the sum of investments, but is certainly not a show of strong value creation.
• Clover Health: The Nashville-based company, which provides health insurance plans to American seniors, raised $900 million in venture funding as well as $400 million in PIPE financing. That adds up to more than its recent enterprise value of $773 million.
• Joby Aviation: The maker of electric vertical takeoff aircraft raised close to $800 million in venture funding, plus $835 million in a PIPE transaction. It’s recent enterprise value is $1.54 billion.

We’ll defer to more expert analysts to determine whether companies in the above cohort are undervalued at current prices, or whether late-stage venture and PIPE investors were excessively exuberant in setting valuations.

So far, things don’t look quite as beaten-down as they were during the depths of the dot-com bubble burst or the 2008 financial crisis. During those periods, recently public companies were sometimes valued at less than the cash on their balance sheets.

But for venture funds looking to return a nice multiple on investment, these don’t look like winning deals, except perhaps for the very earliest investors. Unless, of course, shares happen to go back up.

Illustration: Li-Anne Dias.