The prospect for Disruptor 50 is greater than ever and fewer Silicon Valley
A banner for Snowflake will be displayed on its IPO day on the New York Stock Exchange on September 16, 2020. It was the largest software IPO in history and was one of eight CNBC 2020 Disruptor 50 companies to go public. More disruptor deals are coming soon.
Brendan McDermid | Reuters
With we’re calling for nominations to the CNBC Disruptor 50 list in 2021, the choice for new businesses is greater than ever.
Since we picked the Fastest Growing, Most Disruptive Private Companies of 2020 last June, more names have gone public on that list than any other annual list since the original Disruptor 50 list in 2013 – qualify still for nomination.
The past half year has been a record year for IPOs, and so far there have been eight public offerings from Disruptor 50: Airbnb, Affirm, DoorDash, C3.ai, Snowflake, Lemonade, Root Insurance, and GoodRx. There were also two pending SPAC mergers – SoFi and Butterfly Network. And yet another company, UiPath, filed a confidential S-1 to go public.
Those exits on some massive reviews – Airbnb now has a market cap of $ 108 billion – speak for the maturity of these companies and how long they waited to go public. The artificial intelligence company C3.ai was founded in 2009. GoodRx was founded in 2011. These companies had well-established relationships with Fortune 500 business partners before they went public.
The companies on the 2020 list also saw massive demand for their stocks. The Disruptor 50 index, which includes all companies from previous lists that went public, is up 145% in the past 12 months, compared to the Nasdaq’s 42% increase over the same period. These stock moves are due not only to the anticipation of a big pop on day one for IPOs, but also to the company’s products and services adding to the digitization of the economy, which accelerated during the Covid-19 pandemic.
Take the way Affirm enables people to distribute payments for Peloton bikes and other large ticket purchases, a no-fee alternative to a credit card. Or how Root and Lemonade use artificial intelligence to streamline and simplify the insurance purchase process. Snowflake helps companies move their data to the cloud and run businesses from anywhere.
Prosperity and innovation beyond Silicon Valley
This massive wealth creation will have a ripple effect that will not only benefit the Angels investors, VCs, and their limited partners who have backed these companies. Paying out to early employees at these companies could spawn the next generation of angel investors. Those employees who end up selling their stocks will have new, deep pockets that could both encourage more entrepreneurship and allow them to place bets and start young entrepreneurs.
And that wealth creation is taking place in more places across the country. Last year’s Disruptor 50 was the first time more than half of the companies (33) were from outside of Silicon Valley. This trend, which legendary investor Steve Case calls the “rise of the rest”, will only intensify as more tech giants leave the valley and more investment funds flow into other areas.
PitchBook predicts 2021 will be the first year the Bay Area’s share of venture capital falls below 20% while other cities like Atlanta and Austin attract more entrepreneurs and investment. In 2020, the US raised $ 156.2 billion in venture capital. 23% of deals, equivalent to 39% of VC dollars, went to Bay Area-based companies. PitchBook reports that Silicon Valley’s share of the number of transactions has decreased every year since 2006.
The fact that the percentage of dollars going to companies in Silicon Valley is so much higher than the number of transactions shows that companies there raise more money per round of investment, which is a sign of larger and more established companies. PitchBook argues that it doesn’t matter if a company is in the same building, city, state, or country as investors, which has somewhat offset the playing field for investor attention. For the 2021 Disruptor 50 list, we hope that access to capital and opportunity is not restricted by location, and we will continue to find industry-changing startups wherever they may be.
Nominations are open to the 2021 CNBC Disruptor 50, a list of private companies using breakthrough technologies to become the next generation of large public companies. Submit by Friday, February 12th at 3 p.m. EST.