|Lei Jun, founder of China's fast-growing smartphone maker, Xiaomi Tech. Source: china.org.cn
In 2014, 40 global startups were given valuations of $1bn or more, through fund raising in the year doubling the number of such companies there were at the start of the year, according to Dow Jones VentureSource. The Wall Street Journal reports that Xiaomi (little rice in Mandarin) Corp., the Chinese smartphone maker, is the most valuable, at $46bn after a recent private round.
There are 71 firms in the Wall Street Journal Billion Dollar Startup Club: US-based are at 49 including Stripe founded by the Irish Collison brothers; Europe 4; China 9; India 4; Israel 1; South Korea 1 and Canada 1 and 2 from elsewhere.
A “startup” is usually defined as a firm that is up to one year old. Here, it is loosely defined as a young, private company backed by venture capital, with overall valuations derived from the price that pre-IPO (initial internet offering) investors pay for a fraction of the equity.
Interactive here from The WSJ with details of each company - no paywall.
Uber, the taxi app service follows Xiaomi at $41bn.
The Journal says that Peter Thiel , an early investor in Facebook and co-founder of PayPal, says on balance the field of startups doesn’t feel overvalued. The sum of billion-dollar-plus valuations in the US—at roughly $160bn—would still be less than half of Google Inc. ’s $365 billion market cap, he says.
Others are less sure.
“Without question in some sectors there is a pricing balloon bubble in late stage,” said Peter Fenton, a partner at Benchmark, an early investor in Uber, Dropbox and Snapchat. “At some point, these companies will be held accountable for their financials.”
Atomico, the London-based venture capital group led by Niklas Zennström, Skype co-founder, tracks software companies founded since 2003 with valuation of $bn+ and by the end of December it had tracked 140 - see box in this Finfacts report.
The Journal says the median technology company was 11 years old at its IPO in 2014, up from five years old in 2000, according to Jay Ritter, professor of finance at the University of Florida. It adds that at least 30 companies have gone public in the US with lower prices than they were worth in private stock sales or option grants in the prior 90 days, according to Valuation Advisors, which conducts valuations for private companies.
IPOs of companies listed in the US raised $96bn across 293 deals in 2014, according to Dealogic. Both figures were the highest since 2000, the dot-com era, when 432 IPOs raised $105bn.
China's Alibaba Group Holding Ltd., an e-commerce giant, raised a record $25bn.
IPOs in 2014 again delivered share-price gains that beat the broader market, rising 18.9% from their offer price versus a gain of 11.4% in the S&P 500.
Among the biggest gainers was Alibaba, the Chinese e-commerce company, whose shares rose 38% in first-day trading, and have gained a further 13% from there. Radius Health Inc., a maker of drugs for osteoporosis and other conditions, was the top-performing IPO in 2014, rising 375% from its offering in June through Tuesday.
The newspaper says that adjusted for inflation, the current 70+ “billion dollar” startups globally is nearly twice as large as the number during the boom years 1999 and 2000.
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