January 8, 2013 2:00 am EST - As we close the books on a year of mixed results for private companies and private market deals in 2012 - from IPOs to venture capital fundings to private equity deals and other private company M&A - PrivCo now looks forward to a new year for private companies and deals in 2013. 

While in 2012 private companies in favored industries such as Enterprise Software and Big Data succeeded, untested business models of many consumer Internet companies failed to live up to their lofty expectations. This is epitomized by Facebook's tremendous IPO flop, which soured investor interest in consumer tech companies for the rest of 2012.
 
The second half of 2012 saw a venture capital "Series A Crunch," a result of too many Seed funded startups and not enough Series A venture capital to go around. New accelerators and incubators emerged on almost a weekly basis, seeking to replicate the successes of leaders Y Combinator and TechStars. With such a tumultuous year finally over, PrivCo provides our Top 10 Predictions for 2013 (#1-5 revealed here, look out for our newsletter tomorrow containing predictions #6-10):
  1. TWITTER Will File For An I.P.O. In 4th Quarter, IPO In Q1 2014 At $15B Valuation
  2. HOSTESS Will Be Broken Up, Its Bread Brands Acquired By Grupo Bimbo
  3. TORY BURCH LLC Will File I.P.O. At $4B Valuation, Use Funds To Expand To Asia

  4. The Incubator Wave Will End: One-Third Of All Incubators Will Shutdown In 2013, With Seed Money Partially Replaced By Crowdfunding

  5. The Top Underwriter Of U.S. IPOs In 2013 Will Be CREDIT SUISSE (For The 2nd Year In A Row)
  • #1-5 Revealed Here, Look Out For Our Newsletter Tomorrow Containing Predictions #6-10!

 

PrivCo's Exclusive Predictions Of Private Company Headlines In 2013:

 

1. TWITTER Will File For IPO In 4th Quarter, IPO In Q1 2014 At $15B Valuation

  • According to PrivCo's sources with knowledge of the matter, Twitter Inc. plans to file for an IPO as early as the 4th quarter of 2013, and plans to go public in the 1st quarter of 2014.
  • Recent new monetization efforts are leading to increasing revenue for Twitter (Promoted Tweets and Targeted Tweets for advertisers, partnership with Pinterest, etc.) and are monetizing at rates exceeding even Twitter's initial projections.
  • PrivCo estimates that Twitter will generate $245 million in revenue in 2012, up 180% over 2011's $87.5 million. Twitter's revenue should double again to over $500 million in 2013, with its preliminary S-1 filing showing 3 full quarters of its new monetization efforts working beautifully. It would then file a pre-roadshow S-1 amendment in late January showing a strong 4th quarter before IPO'ing at just the right time in February 2014.
  • "Twitter will learn from Facebook's flawed playbook and do the opposite.  Twitter will conservatively price its IPO at 30x revenue, or $15 Billion," said PrivCo CEO Sam Hamadeh today in a statement.  "Unlike Facebook, which waited too long to IPO (until its growth rate decelerated), Twitter will IPO at just the right inflection point: while revenue grows in triple digits and with its final pre-IPO quarter reported at its seasonally strongest 4th quarter. Contrast this with Facebook, which delayed its IPO so long that its final pre-IPO quarter was a seasonally weak and disappointing 1st quarter."
  • Recent management hirings (Mike Gupta from Zynga as CFO, Mike Davidson of Newsvine as Vice President of Design).
  • Aggressive acceleration of international expansion in 2012: planned rollout in 50 countries in 2012, with 33 languages supported.

 

 

2. HOSTESS BRANDS Will Be Broken Up, Its Bread Brands Acquired By Grupo Bimbo

  • PrivCo predicts that Hostess Brands, Inc. (PrivCo Private Company Ticker: TWINKIEP) will be split in two, selling its bread business and its cake/pastry businesses separately in 2013.
  • Hostess' bread business (with brands such as Wonder Bread and Nature's Pride) will be acquired first, by Grupo Bimbo, one of the world's largest makers of bread, for at least $350 million.
  • Hostess' cake & pastry business (including the Twinkies and DingDongs brands) will then be sold later in 2013, along with the Hostess brand itself, for at least $750 million, for total proceeds from the Hostess sale of approximately $1.1 Billion, all of which will go to pay its creditors.  "Nothing will be left for equity holders Ripplewood Holdings" PrivCo has calculated.

 

 

3. Tory Burch LLC Will IPO At A $4 Billion Valuation, Use Funds To Expand To Asia

 

 

4. The Incubator Wave Will End: One-Third Of All Incubators Will Shutdown In 2013, With Seed Money Partially Replaced By Crowdfunding

 

  • PrivCo predicts that by the end of 2013 at least 1/3 of existing incubators (accelerators) will shut their doors.  PrivCo analysis of incubated startups shows that 90% of all exit value for incubator alumni companies is created by just the Top 10 Incubators like Y Combinator and TechStars, leaving poor to negative returns for the hundreds of recently opened copycats.  
  • In addition, PrivCo predicts that in 2013, the surviving incubators will sharply reduce the amount of seed capital they invest in their startups, following Y Combinator’s example (which recently reduced the amount of funding in each of its accepted companies to just $80,000, from the previous $150,000, concluding much of the excess funds were spent unwisely).
  • PrivCo predicts that crowdfunding will gradually replace B-level incubators as the new means by which small companies attain their initial seed capital.
  • The recently passed JOBS Act legalizes crowdfunding as well as general advertising of startup fundraising, encouraging the general public to participate in funding of startups.  PrivCo expects Kickstarter emerging as market leader, but that secondary markets such as SharesPost and SecondMarket will also compete and enter the online startup fundraising business in 2013, providing startups with even more alternatives, making low-quality incubators low value-added entities.

 

 

5. The Top Underwriter Of U.S. IPOs In 2013 Will Be CREDIT SUISSE (For The 2nd Year In A Row)

  • Credit Suisse will surpass traditional IPO underwriting leaders Goldman Sachs and Morgan Stanley for the second year in a row at the top of the U.S. IPO league tables.
  • Credit Suisse is building up its equity capital markets business at a time when competitors are trimming their presence in the industry; Equity products are core to Credit Suisse's strategy.
  • Internal changes such as the integration of its origination and syndicate units will lead to continued success.
  • Credit Suisse will continue to thrive off of momentum built in 2012, when it jumped from 8th ranked U.S. IPO underwriter in 2011 to 1st place in 2012.
  • "Credit Suisse's position as a leading IPO underwriter - especially for tech IPOs - recalls the days in the late 1990s during the first Internet IPO wave, when its powerhouse tech deals team led by Frank Quattrone and "tech M&A god" George Boutros minted new tech IPOs on an almost weekly basis from Credit Suisse's west coast offices," Hamadeh recalls.  (Note: Credit Suisse - under Quattrone and Boutros' tech team -  was the placement agent for the Series B venture round in May 2000 of Vault.com, which like PrivCo was also founded by Hamadeh.)

 

 

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