March 10, 2021

The Most Anticipated Pre-IPO Companies In 2021

HUDSONPOINT Team
Written by: HUDSONPOINT Team
IPO, Pre IPO

Invest in Pre-Ipo Companies

2021 Pre-IPO Companies

There have been a number of impactful IPOs in the last year—such as Airbnb, DoorDash, DraftKings, and Bumble, to name a few.

Why do they catch so much attention in the market? It’s usually due to their recognizable brand names, disruptive products and services, scale, and quality. While we’ve seen these stocks jump significantly on their first day of trading, often, that’s not where the real money was made.

 

Many investors who took a stake in earlier rounds of funding have witnessed these investments grow from a seed-stage idea to a fully-fledged public company. Angel investors and institutions who invested before the IPO have the potential to profit by backing the companies during its pre-public stages.

 

Pre-IPO investments allow qualified investors to capitalize on private companies that are looking to go public in the future. One of the best ways to earn the potential for higher than market returns is to invest in well-regarded private businesses with a solid plan to IPO. Of course, these opportunities are in hot demand by investors looking to take part in the ‘next big thing.’

 

Researching these opportunities early is key to creating a diversified portfolio while potentially achieving higher returns. Choosing the right one might be the key to earning outperforming returns; perhaps one will be the next Apple or Amazon?

 

All private investments involve a higher degree of risk, and while these companies seek to file an IPO, they may never go public.  Some companies that seek to eventually have an IPO, may fall under financial hardships, political disruptions or encounter fierce competition.

 

In this article, we have put together some of the most anticipated pre-IPO companies that have a plan to go public in 2021.

 

Viral sensation: ByteDance

ByteDance is the Chinese parent company of the viral video app TikTok. No stranger to controversy, ByteDance clearly has some issues to deal with before going public. As a company that blew up seemingly overnight, there will inevitably be teething issues as the organization faces increasing international scrutiny, both on the financial and privacy fronts.

 

Nonetheless, ByteDance has leveraged its unique recommendation engine to propel TikTok, Douyin (the Chinese equivalent), and Tautiao (a news aggregation service) to deliver approximately $37 billion in revenue last year. Based on its latest funding round of $2 billion, ByteDance is now valued at an enormous $180 billion—an astronomical figure that would make an IPO one of the biggest of the year.

 

Whether or not ByteDance chooses to pursue an IPO in 2021 is still uncertain, but as one of the most news-worthy pre-IPOs of 2020, investors should keep their eye on the viral sensation.
 

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Fintech is all the rage: Stripe

Stripe is a booming payment processor (think PayPal and Square) dual-headquartered in both San Francisco and Dublin. The pre-IPO company is riding the wave of booming e-commerce sales during COVID-19 through its online payment processing software and e-commerce APIs.

 

Based on its last publicly available funding round, Stripe secured $600m in funding, pushing its valuation in excess of $36 billion. On the latest news, Stripe is seeking a $100 billion valuation in fresh funding rounds—a significant figure that places it as a key beneficiary of the shift to digital payments and online shopping.

 

If Stripe does indeed pursue its IPO this year, it will likely be one of the largest, topping last year’s star performer Airbnb. Stripe has a significant runway for growth as global payments continue to move online. Fintech superstars, including Stripe, are set to be some of the most anticipated pre-IPO opportunities investors want a piece of in 2021.

 

The fintech behemoth: Ant Financial Group

One potential challenger to Stripe for the number one fintech spot is Ant Financial Group. Ant Group was founded by Jack Ma and Alibaba Group, one of the largest IPOs of all time. The company operates the dominant mobile payment app in China, the most populous and second-largest economy in the world.

 

Alipay, the centerpiece of Ant’s offering, allows users to pay for many of their everyday transactions—including the bus, plane tickets, online shopping, or food delivery. Ant integrates many sources of funding, including credit cards, debit cards, or their own internal line of credit, called Huabei. It’s a holistic financial service that dominates Chinese (virtual) wallets.

 

Ant Group was set to go public last year as private funding rounds pushed the valuation to almost $300 billion. Due to concerns from the Chinese government, the IPO was shelved in the immediate future, with the valuation dropping substantially as restrictions and government oversight threatens the autonomy of one of the world’s largest fintech businesses. We can be sure that Ant Group will resolve all of its issues in 2021, but we do know it remains one of the most buzzed up pre-IPO opportunities today.

 

A social network: Nextdoor

One pre-IPO opportunity that is (somewhat) flying under the radar would be Nextdoor. Nextdoor addresses many of the issues users have with mainstream social media— including anonymity enabling negativity. Nextdoor is designed to connect communities in their local neighborhoods.

 

Members must verify their name, address, and groups they are part of. The idea is that connecting with people around your proximity generally improves the odds of a favorable interaction.

 

Competing with Facebook is a challenging game, although Nextdoor is making a name for itself. The company has already raised $470m from investors, targeting a $5 billion valuation in an upcoming IPO. Social media can be incredibly disruptive if the network effect latches on; let’s keep an eye on Nextdoor this year.

 

Technology is the future: UIPath

UIPath is a rapidly growing company providing software services for the booming robotic process automation (RPA) industry. Hitching onto the mega-theme of Artificial Intelligence (AI), UIPath has picked an opportune time to come into existence. Their organizational goal is centered around achieving the Fully Automated Enterprise™—a business where automation is used to ‘unlock unlimited growth opportunities.’

 

An ambitious—if inevitable—concept, there could be a lot of money to be made if they’re successful. UIPath just closed its most recent Series F funding round, raising $750 million and giving it an enormous $35 billion valuation.

 

The pre-IPO company has been on a massive run of expansion, growing its revenues thirty-fold from 2017 to 2019, a trend that has surely continued to today. As the world becomes increasingly reliant on efficient automation, it’s positioned itself as a leader in a dynamic market.

 

Cryptocurrency fights back: Coinbase

Coinbase is the largest cryptocurrency exchange in the US. With Tesla sparking renewed interest in Bitcoin (and Coinbase itself), the digital currency shot to new all-time highs as traders frantically piled into a range of crypto-assets.

 

Coinbase makes money by facilitating trades in cryptocurrency, so naturally, the more interest there is in alternative assets, the bigger the boon for Coinbase.

 

Now with more than 35 million users, Coinbase is ready to hit the public market. According to Crunchbase, the company last raised funds in 2018, supporting an $8 billion valuation. Those pre-IPO investors are set to earn a substantial rate of return as Coinbase goes through the IPO process later this year with a current expected valuation many multiples of what it was back then.

 

A popular trading platform: Robinhood

Robinhood is an online, commission-free stock trading and investing app. Robinhood has had no shortage of news lately as it found itself at the center of the ‘Reddit Army’ vs. Wall Street boxing match. Recent trading frenzies ensued as online traders took it upon themselves to squeeze large institutions’ short positions in securities such as GameStop and AMC.

 

Robinhood chose to temporarily halt trading to the dismay of its largely retail customer base. Whatever position you take on the matter, it highlights the need for Robinhood to raise additional capital, improve its trading infrastructure, data governance, and corporate policies. In the middle of the mayhem, the company raised over $3.4 billion across two fresh funding rounds. With over one million new downloads a week and a pre-IPO valuation approaching $40 billion, the hype for Robinhood equity will probably not settle anytime soon.

 

An alternative way to shop: Instacart

Instacart is an online marketplace offering flexible delivery and pickup services—it’s a clear beneficiary of the COVID-19 situation as consumers flock to online purchases. Initially designed as a service to deliver groceries to customers, its convenience has expanded significantly to cover all retail areas. As a similar business model to DoorDash, the recent IPO of the latter certainly bodes well for Instacart’s prospects.

 

Instacart last raised capital in October 2020, valuing the business at $17.7 billion. These pre-IPO investors are onto a good thing as analysts predict a $30 billion if (or when) the organization goes through with its IPO ambitions. It’s certainly a hot pre-IPO opportunity in a booming sector worthy of further scrutiny from investors in 2021.

 

Electric delivery trucks: Rivian

By now, everyone has heard of Tesla. Many believe that electric vehicles are the future of affordable and sustainable transport. Rivian is another electric vehicle company that has already secured backing from Amazon and Ford. Amazon has committed to building a fleet of 10,000 Rivian electric delivery trucks by 2022.

 

This year Rivian plans to release two vehicles, the R1T pickup, and the R1S SUV—targeting the action-adventure customer segment. Rivian doesn’t need to take on Tesla directly, rather they’re working in a supplementary space.

 

The market for electric vehicles is significant, and there is room for multiple players. Rivian’s most recent funding round raised $2.65 billion, clocking in a post-money valuation of $27.6 billion. Be sure to keep an eye on this futuristic car manufacturer.

 

How to access pre-IPO opportunities

All of these companies are tantalizing for investors looking to participate in the ‘next big thing.’ Pre-IPO investments are a class of investments that are may provide  uncorrelated performance to public markets Traditionally, only institutions could access pre-IPO opportunities, but times have now changed—non-institutional investors can play in the sandpit too.

 

HUDSONPOINT Capital enables both retail and institutional investors with a platform to access a range of alternative investments, including upcoming pre-IPO investment opportunities. By pooling investor’s funds, HUDSONPOINT Capital’s alternative and pre-IPO investment platform offers unique investment solutions with risk-adjusted return profiles designed to meet your financial goals.

 

Please note that any investment involves risk including loss of principal. Some risks of investing directly or indirectly in real estate include declining real estate values, changing economic conditions and increasing interest rates. Private Shares are for qualified investors and involve a high degree of risk

There is a risk in buying pre–IPO shares is that the company may never IPO. In those cases, since the shares never trade on the open market, they are highly illiquid and it becomes more difficult (although not impossible) to sell them for a profit.

This is for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation of any products or services. Opinions are subject to change with market conditions. The views and strategies may not be suitable for all investors and are not intended to be relied on for legal or tax advice.

Securities offered through National Securities Corporation Member FINRA/SIPC

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