A Case for Down Rounds: Featuring Allbirds (BIRD)

The last few quarters have witnessed a steady addition of Unicorns being added to the Prime Unicorn Index. With Q2 2022 having the most quarterly additions in the Index’s history.

The Prime Unicorn Index saw the biggest increase in companies going public throughout 2021, with Q4 2021 being the largest amount covering 30% of the index components. Q2 2022 currently has 17 companies that are public so far, with the top ten consisting of all privately held companies.

However, with all this positivity we have also noticed the public companies crippling in performance. The Prime Unicorn Index team took a deeper look into the price movement of its underlying component companies that recently went public. You can read our previous post Private Market Perception vs. Reality: A look at Toast (TOST) for more understanding.

Allbirds is another great example of down round venture funding, finding their way to the public market and then getting burned. The environmentally friendly footwear company started raising money in 2015, and over 5 years they managed to rake in $200 million. Their last round before going public was a down round, priced at $11.56 for Series E (previous Series D was at $12.89). They managed to push through to an IPO in November of 2021. Had an investor participated in the Series E round they would have gained 29% and 149% at IPO price and first close price, respectively.

Unfortunately for Allbirds the stock has continued to crumble. As of the end of Q1 2022 had you participated in the Series E (and not sold out) you would be down (-48%). In fact, from IPO on November 2, 2021, until the end of Q1 2022 the loss would have been (-50%). From first close price to the end of Q1 2022 the loss would be (-79%).

The continued decrease in value should not be worn as a badge of shame. There are many broad market forces that are affecting all the exiting unicorns in the Prime Unicorn Index. The main take away is proven in the charts above where investing in the last round prior to IPO would still be more lucrative than waiting until IPO to put capital to work. 

The Prime Unicorn Index is currently tracking 144 companies with valuations of $1 billion or more to be considered into the index. Components must be headquartered in the U.S. and be privately held. For more information on the Prime Unicorn Index, please visit primeunicornindex.com.

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