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Mutual Fund Titan Identified as the Top Investor in Unicorn Companies

September 26, 2016

Mutual Fund Titan Identified as the Top Investor in Unicorn Companies

PitchBook releases its annual 2016 Unicorn Report


SEATTLE — September 20, 2016 — The number of unicorns, privately-held companies valued at or above $1 billion, has reached 181 globally, according to recent analysis conducted by PitchBook Data. Of the 181 boasting valuations north of $1 billion, Fidelity Investments has a stake in 24--the most of any other investor. The bulk of Fidelity’s first-time investments into such venture-backed companies occurred in 2014 and 2015 with only two investments into unicorns in 2016 so far. Billion-dollar companies within Fidelity’s portfolio include Snapchat Inc., Uber and Pinterest, which have a combined value of nearly $100 billion.


The Boston-based firm’s ranking as a top investor in unicorns comes at a time when investment activity by non-traditional VCs has reached record levels. Last year alone, global mutual fund investors poured $23.7 billion into 192 VC transactions--the highest amount of capital invested ever and a 66% increase from the year prior.


Tourist investors join at the late stage


Fidelity Investments and T. Rowe Price are two of the top five investors in today’s unicorns, alongside traditional VCs SV Angel, Sequoia Capital and Andreessen Horowitz. Collectively, the two mutual funds have invested in 33 unicorn companies including WeWork, Airbnb, and Dropbox. While this is only a small portion of a mutual fund’s investment strategy, it demonstrates their need to seek alpha in rapidly growing companies. With private companies staying private longer, mutual funds have been forced to look to the private capital markets and, in this case, some of the world’s most valuable companies.


This trend is further illustrated by mutual funds’ point of entry into unicorn companies--most commonly at the Series C stage or later. Of Fidelity’s 24 investments into unicorns, only three were early-stage investments (Series B or below). Similarly, the majority of T. Rowe Price’s investments in unicorns were at the Series D and Series F stages, with only two early-stage investments into Dropbox and Magic Leap.


“Over the last few years venture capitalists have generated impressive returns for their LPS,” said PitchBook senior analyst Garrett Black. “At the same time, private companies are staying private longer, the public market remains somewhat volatile and the rise of interest rates is still looming. These factors make investments into VC-backed companies more attractive than ever to tourist investors like mutual funds. We anticipate they’ll continue to invest in this asset class.”


Thus far in 2016, Fidelity and T. Rowe Price have invested in five unicorn companies including Snapchat, Oscar Health and Glassdoor. Wellington Management and Blackrock are other examples of tourist investors that have invested in unicorn companies this year, and have made investments in startups like Sprinklr, Domo and Pinterest.


Traditional VCs are the real MVPs


Despite mutual funds’ foray into the private capital markets, traditional VCs continue to dominate the unicorn landscape by identifying young, emerging companies and investing at the early stages. The top traditional VC investors at the early stage (Series C and before) are SV angel, Sequoia Capital, Andreessen Horowitz and Khosla Ventures--all of which have invested in 10 or more unicorn companies at the Series C stage or before.   


Additional findings in this report include:

  • U.S. VC deal flow by quarter
  • Unicorn formation by year
  • Deal term highlights for unicorn companies  
  • Breakdown of unicorn funding
  • Unicorn league tables


Download the full report here http://reports.pitchbook.com/2016-vc-unicorn-report/. For a daily dose of the latest news in the venture capital space, subscribe to the PitchBook newsletter //pitchbook.com/PEVC_News.html.


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