Big Tech's Massive Value: Are We Numb to the Numbers?

The TechCrunch Exchange: Startup and Market Insights

Welcome to The TechCrunch Exchange, a weekly newsletter focused on startups and market trends. This newsletter is inspired by the daily column on Extra Crunch, but is freely available for your weekend reading. Sign up here to receive it every Saturday morning.

Let's discuss funding, startups, and current IPO speculation.

Public Markets and Startup Signals

TechCrunch primarily concentrates on early-stage companies. However, the performance of established, publicly traded tech firms can offer valuable clues about the overall health of the technology sector. Consequently, we maintain a degree of attention towards former startups that have successfully completed an Initial Public Offering (IPO).

Big Tech's Strong Performance

The major technology companies – Facebook, Alphabet, Microsoft, Apple, and Amazon – demonstrated remarkably positive results in the first quarter of 2021. Details of their performance can be found here and here, but this represents only a portion of the broader picture.

While these companies have consistently reported strong financial results, the recent increases in their valuations have been particularly noteworthy.

Valuation Growth

Microsoft’s share price dipped to $135 in March of last year. Currently, it trades at over $252 per share. Similarly, Alphabet experienced a low of approximately $1,070 per share, and now boasts a value of $2,410 per share.

As a result of this substantial appreciation, Apple is now valued at $2.21 trillion, Microsoft at $1.88 trillion, Amazon at $1.76 trillion, Alphabet at $1.60 trillion, and Facebook at $0.93 trillion. This totals approximately $8.4 trillion across these five companies.

In July 2017, their combined value reached $3 trillion. By mid-2018, this figure had grown to $4 trillion. Over the subsequent three years, it more than doubled.

What's Driving the Growth?

Myles Udland, a reporter at Yahoo Finance, offers some insight in a recent article. Consider his perspective:

Are earnings consistently exceeding expectations, and by a greater margin than ever before? This reduces concerns about the recent stock market gains. It also helps explain the significant capital raised by startups in the U.S., Europe, and the increased investment in fintech companies.

This surge in funding likely contributes to the planned public offering of Zomato and the anticipated debut of Robinhood.

A Thriving Market – For Now

This market environment reflects businesses operating at peak efficiency. However, it’s crucial to remember that economic cycles are not perpetual, and periods of growth inevitably come to an end.

A Pause in the Insurtech Sector

Following The Exchange’s latest coverage of fintech investment and our previous summary of insurtech startup funding rounds, further observations regarding this specific startup area are presented. It can be generally considered a component of the wider financial technology landscape.

We will now feature insights from John Locke of Accel, concerning his investments in The Zebra – which has secured additional funding – and the insurtech sector as a whole.

When questioned about the substantial funding received by insurtech marketplaces such as The Zebra over the past year, Locke explained it stems from a combination of factors. These include insurance providers “embracing marketplaces and demonstrating a willingness to create seamless consumer experiences through them,” increased consumer “comparison shopping” behavior, and demonstrable growth alongside high-quality revenue streams.

Locke stated that The Zebra is “continuing to expand at a rate exceeding 100% with an annualized revenue run-rate of approximately $120 million.” This positions the company for a potential initial public offering at its discretion.

However, some publicly traded insurtech companies have experienced recent stock market volatility. Does this concern Locke? He maintains a neutral to optimistic outlook, asserting that his firm doesn’t believe “all companies in the market will succeed,” but remains confident that “insurtechs” will gain market share from established players over the coming ten years.

Accel continues to evaluate potential investments in this area, as do other venture capital firms. Locke confirmed that the venture capital market for insurtech investments is “noticeably more competitive” compared to the previous year.

Assorted Updates

Wrapping up for today, here are a few noteworthy items we didn't fully cover. These developments deserve attention.

• Productboard recently secured $72 million in Series C funding. This represents a substantial investment. Notably, Tiger Global Management spearheaded the funding round. Currently, the product management software provider serves approximately 4,000 customers. Consider adding this company to your list of potential IPOs within the next two years.
• Hello, a Chinese bike-sharing company, is preparing for a public offering in the United States. A detailed analysis will follow on Monday, but their F-1 filing is now available. In 2020, the company generated $926.3 million in revenue, translating to $109.6 million in gross profit. However, they also incurred a net loss of $173.7 million.
• Darktrace completed its initial public offering this week. While known for its sponsorship of a Formula 1 racing team, it now enters the financial technology landscape as a newly listed U.K. company. Following the less successful IPO of Deliveroo, Darktrace’s positive market debut could enhance the U.K.’s appeal as a listing venue.
• Furthermore, drone delivery may finally be becoming a reality. Draper Esprit, a U.K.-based venture capital firm, led a $25 million investment in Manna. This company aims to utilize drones for food delivery services in Ireland. According to UKTN, “Manna anticipates significant demand for a delivery service that is more environmentally friendly, quieter, safer, and faster.”

It has been an unusual week. Be sure to also follow Anna Heim, the other writer for The Exchange. Until next time!

Alex