Today is the day of the huge VC returns.
This morning we talked a little bit about Sequoia's upcoming huge win with the Unity game engine IPO. Now, Sequoia may actually have the second-largest return among companies that filed for listing with the SEC today.
Snowflake unveiled its S-1 this afternoon and it looks like Sutter Hill is about to bank. The longtime VC firm, which invests heavily in the corporate space and generally maintains a lower average profile, is the big winner across the board here, coming out with an aggregate 20.3% share in the data management platform, which it was last privately valued at $ 12.4 billion earlier this year. At its latest valuation, Sutter Hill's entire holding is worth $ 2.5 billion. My colleagues Ron Miller and Alex Wilhelm looked at the financials of the IPO filing a bit.
Sutter Hill has been intimately connected to Snowflake's early construction and success, providing $ 5 million Series A funding in 2012, the year the company was founded, according to Crunchbase.
Now, there are some caveats on that number. Sutter Hill Ventures (also known as "the fund") owns approximately 55% of the company's total holding, with the balance owned by other entities owned by members of the company's management committee. Michael Speiser, the company's partner who sits on Snowflake's board, owns just over 10% of Sutter Hill's stake directly himself according to the SEC filing.
In addition to Sutter Hill, Sequoia also has a large chunk of the data processing company: its growth fund is listed with an 8.4% stake in the upcoming IPO. That makes two Sequoia Growth IPOs today, a nice way to start the week this Monday afternoon.
Finally, Altimeter Capital, who made the series C, owns 14.8%; ICONIQ owns 13.8%; and Redpoint, who made the Series B, owns 9.0%.
To see the breakdown of returns, let's start by taking a look at the company's share price and carrying values for each of its capital rounds:
Also, what's interesting is that Snowflake has broken down the stock purchases by company for the last four rounds (D to G-1) that the company has collected:
This level of detail actually allows us to roughly compare the multiples of invested capital for these firms.
Sutter Hill, despite initially owning large sections of the company, continued to buy stock throughout the G Series, investing an additional $ 140 million in subsequent rounds of the company. Adding the entirety of its $ 5 million Series A round and some from Series B assuming pro rata, the company is looking for a yield of the order of 16x (assuming the IPO price is at least equal to the price of the 'last round).
Outside Sutter Hill, Redpoint has the best multiple return profile, as it has invested only $ 60 million in these next-phase rounds while maintaining a 9.0% ownership stake. Both Sutter Hill and Redpoint have bought about 20% of their combined stakes in these rounds of the next phase. Taking a rough calculation, Redpoint expects a return of around 12-13x.
Sequoia's investment multiple is a bit limited as it has only invested in the most recent funding rounds. Its 8.4% stake was bought for nearly $ 272 million, all of which was earned in these late-stage rounds. At Snowflake's latest round valuation of $ 12.4 billion, Sequoia's stake is valued at $ 1.04 billion, a yield of just under 4x. It's very good for mezzanine capital, but nothing like the multiple that Sutter Hill or Redpoint got for investing upfront.
Doing the same math and Altimeter is trying to perform better than 6x, and ICONIQ scored 7x. As before, if the stock gets bigger, those returns will look better (and of course, if the stock collapses, well ...)
One final note: The pattern for these last four rounds of funding is unusual for venture capital: Snowflake appears to have "spread the love around", having multiple companies amassing stakes in the startup in different rounds rather than having an edge. definitive.