Thirteen years ago, Forerunner Ventures began helping to guide a new era of consumer startups, including Warby Parker, Bonobos and Glossier. No one has gone through the traditional IPO process. The Warby Parker was made public through a special purpose acquisition vehicle. Bonobos was acquired by Walmart. Glossier remains private, along with many other design brands in Forerunner’s portfolio.
According to Forerunner founder Kirsten Green, that’s not a failure. In today’s landscape, almost every alternative to traditional IPOs has become new norms.
Consider that companies such as Fintech Chime and Smart Ring Outfit Oura, which were founded in 2012 and 2013, were early pioneer bets, achieving a $5 billion north valuation, demonstrating their sustainability in a busy market. However, Chime was filed confidentially for public disclosure, but Ourura’s CEO says there are no immediate plans for the IPO.
On the night of TechCrunch’s StrictlyVc last week, Green made it clear he didn’t care. When asked specifically whether she was troubled by delighted CEO Tom Hale, she repeatedly told the media that despite strong sales, she would not prepare an IPO right away, calling it an “off charts phenomenal company,” adding, “we’re not even thinking about our table because we’re here for sale.”
Instead, she suggested that investors long ago adapted to a world where traditional public products were less.
“We’re engaged in the secondary market and buying and selling,” Greene talks about the pioneer team, characterizing the change as practical and strategic. “Companies are waiting for a very long time to go public. A venture model is generally a 10-year fund life cycle. If you need to be a double-digit billion dollar company, if you need to be a double-digit billion-dollar company. [stage] A successful IPO or [become traded] In the open market, it takes time to get there. “The secondary market “continues to drive the industry,” and “enables people to unlock returns and liquidity.”
For a longtime industry watcher, it’s an incredible change. In the past, companies could expect to see a massive liquidity event, namely acquisitions, and debut in classic stock markets within a few years. However, increasing dependence on the secondary market is not a response to the open market that rewards and benefits already high-performance companies.
Another major advantage Green proposed last week is that price discovery is more efficient, even if more participants are involved, ultimately means discounts on her deal.
For example, Greene dealt with Chime, a neobank that became a well-known name during the fintech boom. That valuation has been garnering Zigzag in recent years, from $25 billion in 2021 to a reported $6 billion valuation in the secondary market last year after shutting down major funds from small groups of venture investors. More recently, it reportedly rose again to $11 billion.
“When it comes to prices, if you think about it, it was a round that was done, Series D, it was a negotiation between the company and the investors. In the secondary market, are there a lot of people in the mix? [eventually] Go to the open market, you have everyone.”
Green can afford to be a little less invested in later valuations, so to speak. It’s always great to be associated with eye-opening numbers, but the company’s strategy of entering the ground floor gives it more room for wiggling than other ventures enjoy. “We’re trying to get faster,” Green said, pointing to the company’s framework of identifying major changes in consumer behavior and combining them with emerging business models.
It worked in the early 2010s when DTC brands like Bonobos and Glossier rode the wave of mobile social and achieved successful breakouts. Subscription First Play has once again worked with subscription first play, like Farmer’s Dog, which sells gourmet dog food, is profitable and reportedly looks at $1 billion in annual revenue. And that’s what the company is now betting, focusing on the intersection of invention and culture, as Green explains.
According to Green, great companies need time to develop, and not all growth paths look the same. Venture capital has once been eager to exit, learned to wait, and become creative when needed.
(You can hear a conversation with Green from this same sit-in via the StrictlyVC download podcast. A new episode will be released every Tuesday morning.)
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