Out of chaos, opportunity: 6 thriving companies that survived the last VC drought
March 22, 2016
In 2009, early-stage venture capital invested in the U.S. dropped by over $5 billion YoY, a 39% plummet from 2008. The decline made sense. The economy had been wrecked by the financial crisis, the supply of good investments dried up and VC firms were forced to be much more selective with their opportunities.
Recent market volatility has stirred up memories of 2008/2009, just months removed from “the year of the unicorn.” While numbers look solid at the early stage in terms of capital invested, deal activity has declined for five straight quarters, with 1Q 2016 on pace to continue that trend. And as valuations begin to come down to earth and venture investment tightens, capital deployment is likely to decrease. The next few months will truly show if investors have backed off their willingness to invest large amounts of capital into unproven companies, but even if that happens, early-stage startups still have hope. Here are some of the companies that raised early stage capital at one of the lowest points in the U.S. economy’s history and have grown into major businesses:
Lending Club: In 2009, Lending Club raised a $12 million Series B round that valued it at $36.3 million, far below its eventual exit valuation of $5.4 billion in December 2014. Investors took a hefty chunk of the company with that 2009 deal, however, snatching a whopping 33% stake at the time. The investment was led by Morgenthaler.
Credit Karma: QED Investors led a late-2009 Series A2 round totaling $2.5 million for Credit Karma that valued it at $14.6 million. With the funding, Credit Karma had raised a total of $5.2 million in VC. The company’s most recent financing in June 2015 tagged it with a valuation of $3.5 billion and brought its to-date funding total to $175 million.
GrubHub: The company is currently trading on the NYSE under the symbol GRUB at a price of over $24 per share and has a market cap of roughly $2.05 billion. In 2009, GrubHub raised a $2 million Series B round at a $6 million valuation. At the time of a bottomed-out economy, a food delivery service might not have been the safest bet, but investors made sure to mitigate the risk by taking a 33% stake in the round. GrubHub IPO’d in April 2014.
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Square: Square happens to be one of the most recent tech companies—or any type of company for that matter—to complete a U.S. IPO. Many saw the offering as a disappointment when Square was valued at just $3 billion, which was roughly half of its highest private valuation. That amount, however, offered a very good ROI for investors in the company's 2009 $10 million Series A financing, which was raised at a $45 million valuation.
Zulily: After finding its niche in the daily deal industry, Zulily completed an IPO in 2013 at a valuation of $2.7 billion. In 2009, the company raised its first institutional round, grabbing $4.6 million at a valuation of $15.5 million. Zulily was acquired and taken private last August by QVC for $2.4 billion.
MongoDB: The company received $3.5 million for a 25% stake in 2009, bringing its total VC raised to $5 million. Since then, MongoDB has raised five additional rounds for a total of $303 million of invested equity. A Series F round in early 2015 valued it at $1.8 billion.