In June, Google announced it was going to buy business intelligence startup Looker for $2.6 billion, the largest acquisition of a Next Billion-Dollar Startup alum.
Eugenio Pace started his first company right out of college in Argentina thinking he knew what it meant to build a startup. He was an engineering and computer science graduate, so that helped, except he didn’t know much about marketing or sales. “Naturally, that didn’t go great,” he says with a laugh.
The startup failed, and he switched gears, joining a bank and then spending over a decade at Microsoft. But the desire to be an entrepreneur was still there, and Pace wanted to test out the idea he had for his company, Auth0, which offers software to companies to build their login tools.
That was in 2013, and this time, it worked out. Auth0 had paying customers in its first year (it now has over 7,000, including NVIDIA) and appeared on Forbes Next Billion-Dollar Startups list in October 2018. Six months later, it announced a new $103 million funding round, raising its valuation to $1.1 billion. "It’s perhaps a reminder of the impact that we have of the business,” Pace says. “I like to say the value of a company is a reflection of the impact that the business generates.
Auth0 is just one of seven companies from Forbes Next Billion-Dollar List to be valued at $1 billion or more by private investors since the publication of last year’s list in October 2018. The others include hospitality startup Sonder, luggage brand Away, design software InVision, online learning platform Coursera, insurance company Lemonade, trucking startup KeepTruckin, and sales tool Outreach.
More than a third of the 100 startups on the list have already gone on to reach or surpass the $1 billion valuation mark either via new funding rounds acquisitions or initial public offerings — no small feat given most venture-backed firms fail. The 100 alumni of Forbes Next Billion-Dollar Startups were selected over the last five years with the help of TrueBridge, the Chapel Hill, North Carolina venture that evaluates hundreds of candidates based on revenues, operating strategies and competitive challenges.
It’s not taking startups long to reach the billion-valuation. Six companies from 2018’s cohort, announced in October, already reached that unicorn status within the last eight months.
Reaching a billion-dollar valuation “means there's real expectations with regards to what we have to deliver on,” says Sonder CEO Francis Davidson, whose company announced a $1.1 billion valuation in early July. “It doesn't mean that we've accomplished much, just that there's a chance that we will accomplish something really great.”
While much of its list cohort is leveling up, one 2018 list-maker has gone through a corporate implosion. In April, the Federal Bureau of Investigation raided uBiome’s San Francisco headquarters reportedly related to its billing practices. California’s insurance authorities are also reportedly investigating the company, according to the Wall Street Journal. At the time uBiome appeared on the list, the microbiome startup’s 2018 revenues were estimated to be $100 million. Since the FBI raid, the company’s cofounders have left its board of directors (along with several others) and its CEO was replaced by a new interim CEO Curtis Solsvig, a long-time restructuring expert that worked with drone maker Lily Robotics. In early July, Business Insider reported that uBiome laid off half of its staff. (uBiome did not respond to requests for comment.)
Others are faring much better: In June, Google announced it was going to buy business intelligence startup Looker for $2.6 billion, the largest acquisition of a Next Billion-Dollar Startup alum. The company debuted on the list in 2017 when it was valued at around $850 million. Also this year, 2017 listmaker HotelTonight sold to Airbnb for around a reported $400 million.
Acquisitions are one exit path, but no Next Billion-Dollar Startups alumni have made it to the public markets this year, despite the unicorn stampede that saw Uber, Lyft, Pinterest and PagerDuty among others go public. Digital health startup Livongo is closest, having set the terms for its IPO. Delivery startup Postmates announced it has confidentially filed to go public, while others, like Poshmark, are reported to be IPO contenders. But Postmates may be keeping its options open: a report in Recode in early July said the delivery company has been exploring acquisition options as well.
Why go public when private investors are so generous? Postmates rival DoorDash, a 2015 Next Billion-Dollar Startups alum, raised $1 billion in capital in the first six months of 2019, catapulting its valuation to $12.6 billion. Other startups like Amplitude and Affirmed also raised big rounds. “It’s helpful to raise capital, especially when the macroclimate seems to be a bit choppy,” DoorDash CEO Tony Xu told Forbes at the time.
Pace, the CEO of Auth0, says he wasn’t as worried about macroeconomics given his company’s revenue is distributed globally instead of concentrated in the U.S. Instead, he felt like it was a good time to raise and accelerate his company's growth. “Frankly, there’s a lot of money available in the markets right now,” he says. “The best time to raise money is when you don’t need to raise money. If you need the money, then you are in trouble.”
Next Billion-Dollar Startups Class of 2019, take note.