December 11, 2019 | Webinar

Q4 SharesPost 100 Fund Update and Outlook: Video Webinar

Past performance does not guarantee future results.

SharesPost 100 Fund: Current Performance

SharesPost 100 Fund: Current Holdings

Christian Munafo 00:12
Cover Slide

[music] Welcome, everyone, and thank you for joining us for today's webinar. My name is Christian Munafo. I am the chief investment officer of SharesPost Investment Management (SPIM), the investment advisor of the SharesPost 100 Fund. And I'm joined here today in San Francisco by Kevin Moss, our chief operating officer.

Kevin Moss 00:28

Welcome, everybody.

Christian 00:30

So thanks again for joining us. As you've heard from us in the past, it's our objective to try to connect with you on a quarterly basis to provide updates, not just on the fund and the underlying portfolio itself, but also to give you some perspectives on things we're seeing in the market, certain trends, things of that nature, which we're going to do today. We greatly appreciate the input we've received from many of you over the past couple of months. And so we've done our best job to come up with an agenda that addresses a lot of these topics that seem to be of interest to you. We would also encourage you to continue communicating with us and providing these topics. It will help us to make sure we're addressing things that are top-of-mind when we come back in front of you for future webinars. So with that being said, why don't I turn it over to Kevin quickly to touch on today's agenda.

Kevin 01:19
Slide 2

Yeah, just real quick, because not all of these webinars are going to be-- some will be longer than others. There wasn't a whole lot that went on this past quarter, but we always want to be in front of you, talking about what's going on in the market, talking about what's going on in our fund. Today, what we're trying to talk about is what's top-of-mind, some of the questions that you came in with and that have been shared with us over the past quarter. Obviously, want to do a fund update. Again, not a whole lot happened with the fund this year, but we also want to take a look back on the entire year as well. And then, of course, we want to look at 2020 and what that looks like.

Christian 01:55
Slide 3

Great. And some technical details, too, before we get started. To the extent any of you may be experiencing any sound or video issues, we would encourage you to try refreshing your browser, and that usually does the trick. You'll also see a number of thumbnails and buttons at the bottom of your screen. You can toggle between different screens with those. So feel free to experiment along the way. One of those will be a Q&A box, and we encourage you to submit questions throughout this presentation today. Kevin and I will do our best to address those questions to the extent we have time. In the event we're not able to address all the questions that you submit, rest assured we will find time to communicate with those of you directly that we were not able to address.

Slide 4

So with that being said, why don't we start with an important topic, which is the valuation environment, particularly as it relates to late-stage venture and growth-oriented companies. Those are clearly very important to us. That's where we spend all of our time, the majority of which involving these multibillion-dollar private companies, which everyone now knows we widely refer to as unicorns. To kick things off, it would be, I think, disingenuous for us not to acknowledge that there's been an element of frothiness in this market for these late-stage private companies over the last few years. But it's important to understand why. We're going to talk through some of that today. Maybe just to give you an example of some of the things that we believe are driving this frothiness, think about the last webinar we had where we talked about the amount of capital that's flown into this market over the last decade. It's been a huge amount of capital, and some of that capital has come from some sovereign wealth investors and very large institutional investors who are managing very large pools of capital.

Christian 03:48

And in order for them to be able to move the needle inside of their own pools of capital, they really need to write large investments, large tickets as we call them. The challenge with that is sometimes what they do is they'll not only force more capital on the balance sheet of the company than they really require, which can cause the company operationally to not execute as well as they should, but it also ends up often in valuation situations where these sovereign wealth and large investors are not as disciplined or focused on today's valuation. They're focused much more on the future market opportunity for them. And we've seen that drive a lot of these valuations up, frankly, larger than probably they should be. So that's one of the factors. Another factor is we've seen a phenomenon over the past several years where we have companies that we would typically not think of as pure-technology or pure-venture-oriented companies when we think venture, getting venture-type, pure-technology-type premium valuations. And we'll talk through some examples. But if you think of companies that we all know of like WeWork and the ride-sharing companies, things like that, at the core of these businesses are not really technology companies. We prefer it more as leveraging a technology wrapper in order to execute on certain parts of their strategy while connecting with the end user. So it's really hard to justify some of the valuations these large companies have received that really are not pure technology companies. And we think that's had an impact on also driving some frothiness up in the market.

Christian 05:22

Another factor, frankly, is the fear of missing out element, right? With the amount of capital that's flown into this market, you have a lot of investors that are having a hard time putting it to work. There's a lot of competition, and the best company is going to attract a lot of attention. So when you're managing a pool of capital, you need to put that capital to work on behalf of your clients. Some investors we've seen just a little bit less disciplined and more flexible on valuation in order to secure those positions. And so we've seen certain investors that historically have been a little bit more conservative with their valuation assignments being more flexible. That's also driven this up.

And I would say, lastly, you have a dynamic where some of these companies, frankly, are very strong operating businesses playing very large total addressable markets with very strong teams, and investors are willing to pay up. And they're willing, and they know that they're paying up, but they really do see a much large terminal value outcome. So those are some examples of what we think has been driving the valuations up. And we mentioned WeWork; this is something that's getting a lot of attention in the media. It's not something that we really focus as much on. As you know, we had an opportunity to invest in WeWork as many have. We did not invest in WeWork for a number of reasons. One of the main reasons, frankly, is it's not what we think of when we think of a true venture-backed technology company. This is a company that has raised billions in equity, billions in debt, has a significant burn rate and just really didn't hit a lot of the requirements that we looked for when we're looking for these types of late-stage operating businesses. Now, it certainly has an attractive growth profile, but it fell short on some of those other elements.

Christian 07:06

So I think what we're seeing with WeWork is actually quite healthy for the market. And the market's essentially telling the company and investors that it got ahead of itself. The large sovereign wealth capital that got behind it is now playing a role, I think, in correcting some of the problems that it helped cause. And this correction is going to ultimately, we hope for the community, help the business operate in a much more streamlined way, but there is a valuation impact. Now, there's a topical, visceral view people have when they hear WeWork, thinking that's going to impact the valuations of the whole ecosystem. At a topical level, that's a very reasonable assumption to make. In practice, we're not as concerned. The headline risk we think is just that. When you look at the stronger, more focused technology venture businesses that we have in our portfolio and that we look to add to our portfolio… while this may have an impact at the headline, the WeWork scenario is not really having that direct impact. And I think as it relates to the IPO for WeWork, when we take a step back, and we look at the IPO market in general - and we'll talk a little about this later, and Kevin will expand upon this - what we're hearing from the market is essentially that there's not just a demand for high growth, there's not just a demand for high-caliber businesses with large addressable in the markets; the public markets are looking for a path to profitably. Now, whether that's 12 months from now, 18 months, 24 months, it's really hard to discern, but there's very clear pattern recognition that the companies that have gone public that have performed well over the last 12 to 18 months have a much shorter term to profitability than companies that have not fared well. And we'll give some examples of those. But why don't I pause here, Kevin, to see if you'd like to add?

Kevin 08:50

Yeah. I was just going to say, just to highlight, a lot of the companies that are being looked at as overvalued or these very hyped companies that came into the year with the ride-hailing companies—like Lyft and Uber, obviously, WeWork—these are companies that are getting a lot of attention. There is still a lot of private companies out there that we look at, that have a very reasonable valuations, that are trading at reasonable multiples, and so you may not hear of these companies. We see a lot of deal flow. We're going to show that in a little bit, but there is a lot of pockets of good, well-run private companies still trading at reasonable multiples. But no doubt, when you have these headline news, like Uber, Lyft, especially WeWork, it's going to affect at least the perception of valuations in private companies.

Christian 09:46

Absolutely. No, I think when we step back, and we look at-- and Kevin's going to touch on some data shortly. Actually, why don't you touch on this data, then I'll add my comment after.

Kevin 09:56

Well, we just kind of took a look back on the year, and we had a very quiet year in terms of NAV movement, and a lot of our shareholders ask us, "Hey, what happened this year? Why didn't the NAV move very much?" As a reminder, we are not correlated with the public market. We have private companies. They don't trade actively in a public scenario. They trade based on, primarily, if they're going to have an exit or if we have to change the fair market value of the company for some reason. The way we change the fair market value, most of the time in our companies, is an exit—it could be an IPO, it could be an M&A. And what really happened this past year, even though there was a lot of headline news on IPOs, it's been a really inactive market in IPOs. The IPO activity this year has been on pace to be lowest in the prior three years. So it's actually been a very slow market. If you remember at the beginning of the year, there was a government shutdown. Lyft was the first big IPO that was going to come to market. It got delayed by a couple of months, and then it finally came to market overhyped, and it was a terrible idea. That was one of our larger positions. But we, again, are not underwriting the IPO market. We're not doing that in this portfolio. We are participating in a liquidity event. We are trying to get into these positions two, three, four years before there's an actual exit. So in our case, we got into Lyft, two or three years before there was an exit. Whether it's a good exit or a bad exit, we still want to be sitting on a two or three X return, if possible. Obviously, we wanted to have a good exit. It's better for our overall portfolio. It's better for the position, but that's what ended up happening with Lyft.

Kevin 11:42
Slide 5

So if you look-- but I think more importantly, if you looked at the M&A market because, really, two-thirds of our positions have an exit via an M&A, and that's generally speaking in the private company world. That's the exit that most of these companies are going to have, and the M&A volume really was down quite a bit this past year, down 25% in Q3 of 2019 versus last year, and it was down 17% versus the same period in 2018. So the M&A markets really slowed up a lot, and we really depend on it. Now, the reasons for these things? It's always an ebb and flow. There's a lot of reasons why these things flow up. I think a lot of the companies in our portfolio that were slated for an IPO this year, companies like Palantir, SoFi, they've been bumped in 2020. A lot of the M&As that we know that our companies were in discussion with, they've also been bumped for a variety of different reasons. So we are actually hoping for a busy 2020, but that kind of explains a little bit as to why there was not a lot of movement. If we're not getting changes in fair market value, our price is going to remain the same. But, again, venture is a long-term investment. Over the long term, we're hoping that we're going to outperform the public market.

Christian 13:03

Thanks, Kevin. Yeah. So I think if you summarize what you're hearing us say, is we're seeing the signs of a cyclical shift perhaps underway. And we've lived through these many times in the past. So you have a scenario where you have valuations perhaps getting some skepticism in this late-stage venture and growth space, which may result in less up round financings. We'll talk through some of the experience we're having in our existing portfolio year-to-date, but if this persists, you could have maybe a 2020 where a lot of these companies are not getting the types of up-round valuations they've become used to. And if the power shifts more towards the investor, more towards the buyer, they're going to take advantage of that leverage, right? Even if the company's operating very well, we may not see as many up rounds. So that's one of the things, that's a sign. Another signal is, as Kevin said, the frequency of the IPOs has slowed down compared to the prior three years. I think Q3 was down about 25% as that slide showed year-over-year, somewhere close to 20% year-to-date and aggregate. Now, that's not to say there's still not great IPOs because there are a number of them, right? There's still a number of really good IPOs, some that we have had in the portfolio like DocuSign, Tenable Networks, others we didn't like, MongoDB, Anaplan, companies like EverQuote that have done fairly well. So there continues to be, I think, an opportunity for very strong companies to get public, but it becomes harder during these cyclical shifts.

Christian 14:34

I mean, similarly, that other signal is the M&A. So we're seeing a slowdown in the M&A. Now, there's still a tremendous amount of capital sitting on the balance sheets of a lot of these corporates that are looking to facilitate M&A activity to foster their growth and allow them to enter more strategic markets. But what we're seeing is this kind of valuation pullback, the IPO slowdown, and the M&A slowdown—these are signs to us that we may be heading into a cyclical shift. I think the good news as a buyer of private assets is this positions us pretty well because in historical cycles, we've seen that these sellers tend to get less price sensitive when there seems to be cycle shifts like this and more fear. And when investors have less conviction in their assets, let alone in their illiquid assets, historically, private equity investors, venture investors have been able to get some very good entry points, and we'll talk about that a little later, but what we're starting to see in our portfolio and our pipeline is an opportunity to buy into very high-caliber assets. Previously, we had a little bit of an issue getting close to the valuation expectations the sellers had. We're seeing better entry point opportunities and we're also seeing opportunities to buy into our existing portfolio in certain situations at lower prices, which allows us to essentially average down our cost basis.

Kevin 15:54

Yeah. I would just point out quickly too. We've been here before. The fund has been running now for five and a half years, a little over five and a half years. We can all remember the selloff in 2016. It was temporary, like the end of last year as well. We performed well. But we had a fairly flat NAV for about a year going into the middle of 2017. 2016: that's when we picked up Lyft, DocuSign, Tenable, Zuora, some of our better exits. And then we made quite a nice move up from there as we had almost 13 exits in 2015. And as we remember, we ended up 6% in 2018 when the market was down about 6%. So we've been there before. This is an ebb and flow. I think right now the nice thing is—and we're going to show in a little bit what we've done this year in the portfolio—because while the NAV has not been active, we've been really busy behind the scenes deploying capital.

Christian 17:02
Slides 6-7

Right. And I think that's really helpful. And what that ultimately all points to is diligence, right? When we're looking to build our portfolio out further, whether it's contemplating buying positions in existing companies we already own, that we have high conviction in, we're getting access to companies we've been essentially chasing, or opportunities that just come across our desk that we learn about and get excited about. It all comes back to having a pretty rigorous information access, investment process, and due diligence process. And so this is one of the questions that came up among some of our clients, so we thought it'd be helpful to spend a couple minutes talking about the type of diligence we do behind the scenes here. And this is not to represent a fully exhausted list of everything that we're doing, but why don't we start with some of the examples and some of the categories.

So market position: so when we're looking at our opportunity, it's really important for us to understand what does this company really do? What is the problem that they're solving or trying to address? Are they doing it through a product? Are they doing it through a service? What is the addressable market they're really going after? How competitive is that market? What is the geographic focus of the business? So we really try to understand the market position that this company has and is trying to expand upon as we're trying to calibrate the quality of asset.

Christian 18:25

Execution is another very important category. So how has the company been executing historically on their budgets, on their forecasts? How have they been executing on their timelines to roll out new products and services? When you have companies that are not yet breakeven or profitable and are still burning capital, it's really important to understand that these companies have the right measures in place to make sure that they're executing in a peaceable way, or you can run into situations where they're burning more capital than you anticipate. So we really need to understand how strong is the execution.

The financials, that's kind of an obvious one. But it doesn't just start and stop at what are the P&L and balance sheet look like. We really want to understand: how are they structuring their offering to the market? Are these multiyear contracts that they're offering the market? Are these license agreements? What is the cost of acquisition to acquire a new customer, and then what is the lifetime value that that client offers them to better understand the economics and profitability that that client can generate to the company over time? What are the churn rates, right? So if a client goes with your product for a year or two years, what is the turnover rate? Do they stay with you? Do they buy more, or do they go away? So we really spend a lot of time understanding a lot of the financials broadly in an operating company.

Christian 19:54

Leadership is clearly important. We want to understand what the management team really looks like. We like to see serial entrepreneurs and management teams that have successfully built and exited companies, high-growth companies before. We also like to see companies with management teams that have domain expertise that's relevant to the particular industry that they're actually focusing on today. So understanding that leadership, what does the board look like, right? Those are all really important things that we spend a lot of time on trying to understand.

And, finally, investment factors. So you hear us talk a lot about the importance of understanding the capitalization of a company. And so that kind of falls into this category. So what does the capitalization of the company look like? What is the securities that we're looking at look like? Is there a primary opportunity? What does that valuation look like? So really trying to understand the investment factors. What do we think the return should be for a company that fits into this category? Different risk profiles we assign to it. Is the management team and board aligned? That's a big issue. If you have a kind of management team and certain key investors who are not aligned—one of them is shooting for a $10 billion exit, the other one would satisfy with a 2—that can create some problems in the boardrooms, and we know that, given our experience.

So, again, this is not the representative exhaustive list of everything we look for. And in full candor, we don't always get access to all this information. But our objective is to kind of use these diligence frameworks in order for us to come up internally with what we call a due diligence rating system. And given the amount of opportunities we see, which we'll touch on in a few slides, it's really important for us to be able to calibrate the quality of the pipeline we have, just figure out how we're going to spend our time. So that's a bit of the diligence that's going on behind the scenes here. Kevin, is there anything you wanted to add to that before we go on?

Kevin 21:47

No. I would just say in particular, as it relates to valuations, we spend a lot of time around the cap table analysis. And that's really important because if you're not a more sophisticated investor, you don't necessarily know what the cap table looks like. A lot of people who are investing in some of these companies, that are investing in primary shares, have these benefits. And, therefore, that's why, in some cases, they're paying up in valuation. And so to the outside world, "Why does this have such a high valuation?" But that particular investor may have a lot of benefits with that share of stock. So that works into the framework of what we do when we're looking at companies. We really want to understand the cap structure of these companies before we make an investment.

Christian 22:39

It's really important, just to add one thing to that, because I think you raised a really important point on the primary rounds. Another thing that's been driving, we think, frothing the valuations up is while you may see a headline valuation at a certain level, the reality is a number of these investors coming into these late-stage opportunities have actually structured some pretty important instruments. And often, we're also seeing some of these investors buy secondary shares in tandem with their primary rounds, and they're buying those secondary shares, sometimes large positions at discounts. So when you kind of do an average weighting of the exposure they have to the company, again, that headline price doesn't tell everything. But in any event, why don't we continue.

Kevin 22:43
Slide 8

Yeah. By the way, that's exactly what we try to do, as well, when we're looking at our companies. So we're just going to give a quick update on the fund. For those of you who may be joining us for the first time, the SharesPost 100 Fund does invest in late-stage venture-backed private companies. When we formed this fund, what we really wanted to do was provide access to all investors. Up to this point, it's very difficult for the average investor to get access to this asset class. Five and a half years ago, a lot of financial advisors came to us and said, "You know, my clients are placing bets in individual companies, but we'd really like to have a diversified approach to this. And we'd like to have all my investors inclined to have access to this asset class." And so that's kind of what we were trying to do when we created this fund. We want to build out a diversified portfolio. We want to have a liquidity feature as well, which is something that they were really asking about. We want to have an experienced management team. And so what we ended up doing was we looked within the '40 Act. If you look in the '40 Act, the Advisory Act of 1940, you'll see a structure called the interval structure. And that's what we went with. Typically, it's used for other illiquid asset classes like real estate, oil and gas, credit. We decided to apply it to private equity. We started off with $100,000 in the fund. It was really, in the very beginning, a great idea and a bit experimental. But now, of course, we've grown it to $200 million, and we have what we have today.

Kevin 25:16
Slide 9

So even though it was a quiet year in terms of NAV, we were very busy this year. As you can see, we've added a lot of new companies this year, more companies than we've had in the past. We added two companies in Q1 of this year: Lime and Mesosphere. We added six companies in the second quarter, so we were very busy. Some more companies in Q3—we have five companies. And, finally, this last quarter, we added two more companies, not only secondary transactions but also primary transactions. We're at the stage now we're able to write that check that allows us to get into some of these higher quality deals and get preferred shares in these primary transactions. That's really important. That's not something we could do in the past. A lot of our positions that we had in our past that have done really well for us, that's actually, in some ways, has held back performance. It's not really the companies that haven't done well. It's the ones that have done extremely well, but we don't have the position sizing. And you can look at Zuora, ServiceMax, Tenable Networks on those types of companies. That's really changed a lot in the last year and a half. All the companies that you see on this page that we've added this year have a big enough position size, so that if we get a nice move in one of these companies, it will have a significant impact on NAV.

Slide 10

And then, of course, again going back to the kind of quietness of the NAV. We had five exits this year. Only one really big exit, and that was Lyft, and we kind of talked about that. That has significantly helped our NAV over the past year and a half, but not so much—it helped in the beginning of the year, obviously, after the IPO came out, it really traded down from there—so it didn't help after that. But overall, it was a very big benefit to us in terms of NAV movement.

Kevin 27:06

But the rest of the companies: Pinterest was an okay exit. Acquia was one of our two M&A exits this year. Two M&A exits, which is really low for a portfolio that has 54 names in it right now. It was a good exit for us. It helped move our NAV as well. Cylance was a relatively small company, a small position that was acquired by Blackberry. And Uber was the IPO—everybody knows what happened with Uber. It was an extremely small position for us, so really had no effect one way or other. So, again, quiet year in terms of exits. Sort of helps explain a little bit as to why the NAV was quiet.

Slide 11

And as Christian was talking about before, the other thing that's going to really help move our NAV is financing. When they do a financing, in many cases, they can do a very big up round, and we have to adjust our fair market value accordingly. That, of course, is going to work into our NAV. This year, we had a number of financings, but really not that much compared to last year. And then if you look at the actual financings like SoFi, like SpaceX, they were flat in this particular year. If you look at Marqeta, that was a nice, big up round. And that did help move NAV. It wasn't a very large position, but it helped move NAV. So what we want to see in 2020, we want to see a lot more rounds of financing. We want to see a lot more up rounds. And that will also help move our NAV.

Kevin 28:43
Slide 12

This next slide just kind of gives you an idea as to how busy we actually are during the year and what we see. We saw close to 2,000 opportunities that came across our desk. Now, we don't go through every single one of them because we can really vet them at a high level pretty quickly. But if you move on to the right, you see that the actually viewed opportunities were a total of 193 opportunities. We ended up pursuing 100 of those. So, in the end, we see a lot of deal flow. We get deal flow from broker dealers. We get deal flows directly from the companies themselves via secondary transactions or primary rounds. We have financial advisors that come to us that have clients with private shares, and they come directly to us when they are looking to give those clients some liquidity. So we see deal flow from a variety of different areas. In the end, year-to-date, we've closed 64 transactions of 24 different companies which represented $72.9 million dollars in capital. That's more deployment in capital than we've had over the past three years. So, again, really busy year for us. What it really, I think, outlines is that this is a fairly young portfolio because we've been busy in the last year and a half, and we're really preparing for the next three, four years out. In the meantime, our positions from 2016, '17, and '18—we're really hoping to see that they continue to mature. We hope to see them come out in 2020, in 2021.

Christian 30:09

Yeah. That's great. That's great analysis. And what I think what these numbers tell you, when you look at the received opportunities, 2,000 opportunities representing almost $40 billion in value. That's another sign of how this market just continues to grow and mature and how the kind of protraction of these private companies getting liquid is just creating more and more opportunities and demand for owners of these private company shares to seek liquidity. And so it's a very large market opportunity.

Slide 13

I think it's important also to analyze a little bit the portfolio itself. And so we came up with a bit of an analysis that we hope is easy to understand. Kevin talked about the fact that we have a fairly young portfolio. This green line that you see on the screen represents new companies that we've added by each year. So the amount of companies we've invested in, in any given year, that's what each of these numbers represent. And if you do the math: about 43 companies representing about 50% of the companies we've invested in to date were made in the last three years, right? So when you go back to the fact that the average holding period we look for is two to four years in any given exit opportunity. As Kevin said, we're going to talk to it shortly. The majority of our capital is just that the work over the last few years, we shouldn't expect to see that capital being exited quickly. It's going to take a little bit of time.

Slide 14

So we're not surprised by that. As we add the additional data, this dark line shows the cumulative number of portfolio companies that we've added since inception. And so we've done about 88 deals to date.

Christian 31:52
Slide 15

And that line at the bottom, the purple line, that represents the amount of exits we've had. So we've actually had a fairly large amount of exits since inception. So of the 88 investments that we've made at a portfolio company level, approximately 38 of those have already been realized. And, again, most of those you could see these numbers are representing on a vintage year basis how many of those investments have been realized. So data tells you what you should expect to see, is that the older investments, a lot of those have been realized versus the newer investments which are young, right? We need time for these investments to grow in value and harvest.

Slides 16-17

But we do have a number of these investments as the additional data will now show you that we believe are well-positioned. So companies that have not yet been realized that are three, four years old, as Kevin was saying. We believe this demonstrates that a number of these companies are now going to be well-positioned to exit in 2020. Again, we're always dependent upon the larger macroenvironment, and so if there does happen to be major cyclical changes, it could take longer for these companies to exit. It could take longer to see write-ups, right, in some of the newer companies that we've made. But it's just important to put some of this data on the chart to really understand that we have a really well-balanced portfolio of companies now that we think are going to continue to increase in value that are younger investments, but they need some time to harvest. And we also have a good balance of older investments that we believe now are three, four years old, are now hitting those terminal dates where we think they're well-positioned to exit.

Kevin 33:30

I would probably just add one thing to that, and that as we're waiting for these exits is everybody realizes when they look at our price movements since inception, the volatility of our price movement is about half as much as any public index. So while we're waiting for these exits to happen, there's not a lot of volatility in our stock price, which is kind of nice and also shows that we're not correlated with the public markets.

Slide 18

I think this next slide just, again, shows visually, again, how busy we were and just how much capital we've deployed this past year, again, the 72.9 million. You can see in 2016, '17, and '18, not that we weren't doing a lot there, but we just really didn't have the kind of capital to actually deploy. So it just goes to show you we raised quite a nice amount of capital this year, and we've been able to deploy it.

Slide 19

We're just putting up the actual holdings as a reminder to everybody. This is on our website. When we do get a new holding, we'll post it to our website. The largest company is from the upper left-hand corner all the way down to the bottom right-hand corner starting with SpaceX as our largest position and then going all the way down to MapR. So at any time, when we do have a new position in a portfolio, we will post it to the website so that everybody can see it. So maybe now that kind of gives the update on the fund. If you want to talk a little bit more about 2020 and our outlook, and then we can probably wrap it up with some questions.

Christian 35:05
Slide 20

Great. Thanks, Kevin. Yeah. So I think you're kind of hearing from us an element of what I would say is cautious optimism. We feel very good about the portfolio that we have. Again, we think that it's going to be a wait-and-see approach to figuring out when we're going to see the valuation environment either determine if it's going to pull back or determine if it's going to go forward. We're seeing signs it may pull back. And so, again, that may cause the underlying portfolio that we manage to have less up rounds during the cycle. It may result in less M&A or IPO activity as the numbers seem to be pointing at. But we have a very strong portfolio that we're very excited about. A lot of these investments, as Kevin just showed you as well, are younger investments, which means that we have a lot of upside, we believe, left in these companies to harvest through both up-round financings and, ultimately, terminal exits, whether it be exits or IPOs. The number of companies in this universe we target just continues to grow. I think there's now somewhere north of 400 of these billion-dollar-plus private companies globally, about half of those being in the US. You can see from our pipeline that we're certainly having no shortage of opportunities identifying attractive interests.

Christian 36:21

And as we continue to raise AUM and grow the fund, I think you can continue to expect to see us have a more aggressive deployment pace, but it's going to be with discipline. It's going to be following our due diligence processes, our investment processes to make sure that every position we add we feel really good about, whether it's adding to an existing position in a company we have, or whether it's adding a new portfolio company entirely. So, again, I think cautious optimism would be the best way to frame this. And the good news is we do think that this is going to continue to allow us to buy assets at good prices, right, when you have pullbacks like this, as we've talked about, and we're seeing it. We see our pipeline right now. We are seeing pricing go down, which ultimately is going to bode very well for us and for the fund because we're able to get in at lower prices to what we believe are very strong assets.

Slide 21

So with that, why don't we turn it over to some questions?

Kevin 37:18

So just reading a question that came in here because we were talking about preferred shares earlier. What is the mix of common versus preferred shares in the portfolio? I can take that.

Christian 37:31


Kevin 37:32

When we first launched the portfolio, it was very hard to get into preferred shares, so we had 100% common shares five years ago. Today, it's looking about one-third preferred, two-thirds common. That actually has gone down a little bit primarily because Lyft went public. And Lyft was the preferred holding. It was a large holding. So we're always trying to get more preferred shares in the portfolio. We would love to get to a position where we have an opposite mix, two-thirds preferred, one-third common. The preferred, as we know, gives us that downside protection especially in the case of an M&A scenario. And so that's what we look like today. But we've done a lot of primary rounds this year. We're going to continue to do more. Again, it's giving us access to a great deal of flow, and it's giving us that preferred shares at the top of the capital stack. So we're going to keep working on that.

Christian 38:28

Great. Let me take the next one here: How many primary versus secondary rounds of financing has the fund participated in, and what are the benefits of investing in a primary round? Good question. We mostly invested in secondary-oriented transactions historically. As Kevin was saying before, as our fund continues to grow in size, we have a greater ability to actually get allocations to primary rounds. Now, it all depends on the situation. So if we have an opportunity to buy existing securities, whether they are preferred or whether they're common at what we believe is an attractive price, we will do that. In some situations, looking at a primary opportunity makes sense. Sometimes it doesn't. I think the advantages we talked about are you're going to be sitting at the top of the stack. Sometimes you may have attractive liquidation preferences under downside scenarios. But in some situations, in many situations, you're also coming in at very high valuations. So it's a bit of a trade-off to understand ultimately in your due diligence analysis, what do you view as the ultimate terminal outcome of the opportunity? And then you factor into your analysis. What is the price that you would be willing to pay in a primary situation? What is the price you could pay for different classes of preferred or common shares on a secondary basis? But the vast majority, to answer the question of the capital that we have committed to date on behalf of the fund, has been in secondaries. We continue that to be-- we expect that to continue to be the case. But where we can, we will take primary positions as well.

Kevin 40:09
Slide 22

I'm just reading. Do you believe you'll be able to increase your average size of investment as the fund grows larger? Yeah. I mean, that's the whole point of our fund actually. We want to continue to increase the positions that we really like. Assuming that the positions are doing well, assuming that we're getting more information, assuming that we know what's going on with the company, typically, if we don't have as much information as we want, we'll have a small position. But if we really like the company, we'll only grow the position as and when we get more information and as the fund gets bigger. The nice thing about this fund, it is an evergreen fund. We are not going out and raising $200 million in capital at one time and then trying to deploy it. This is an evergreen fund. It's a unique fund in that regard. And as we get bigger, we add to our positions, the ones that we want to. And that's something that our portfolio companies really like. They like to see investors like us come in and continue to add positions, where past investors were not taking board seats. But that's a value add that we have to our companies. And it gets us into those primary rounds because it's something that our portfolio companies really like.

Christian 41:25
Slide 23

Great. I think we have time for one more question. Are you seeing more attractive pricing opportunities in the current macroenvironment? Yeah. Great question. I think we tried to address that, but I'll say it again. That's one of the things we're most excited about when we think about the market opportunity ahead in 2020. The pipeline right now is giving us signals that we are having the opportunity to buy into very high-caliber assets at better prices than we have over the last two to three years. And add to positions, as Kevin was saying, that we have high conviction in. So we are seeing that. We expect that to proliferate as we go forward. Again, it's going to depend on whether we do have a sustained kind of a cyclical shift or not. But from everything we can tell, we are seeing a much more improved pricing environment, which is going to bode very well for the SharesPost 100 Fund. So yeah.

Slide 24

So with that, we really appreciate your time. We greatly appreciate your ongoing support. We remain available to answer any questions or comments you guys have. So feel free to reach out to us. Any of the questions we did not touch on due to timing, we will get back to you offline. I think we'd just like to wish everyone a very, very Happy Holidays and best wishes for a prosperous New Year.

Kevin 42:45

Yeah. Thank you, everybody. Thank you for your support and Happy Holidays.


  1. Chicago Board Options Exchange's Volatility Index (VIX) is a popular measure of the stock market's expectation of volatility based on S&P 500 index options.
  2. The NASDAQ-100 is a stock market index made up of 103 equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock market.
  3. The S&P 500, or simply the S&P, is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices.
  4. The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow is a stock market index that measures the stock performance of 30 large companies listed on stock exchanges in the United States.
  5. The Russell 1000 Index is a stock market index that tracks the highest-ranking 1,000 stocks in the Russell 3000 Index, which represent about 90% of the total market capitalization of that index.

Private Shares Fund

Top 10 Holdings as of 09/08/2021*
*Represents 26.08% of Fund holdings as of September 08, 2021. Holdings are subject to change. Not a recommendation to buy, sell, or hold any particular security. To view the Fund’s complete holdings, visit


  1. Chicago Board Options Exchange's Volatility Index (VIX) is a popular measure of the stock market's expectation of volatility based on S&P 500 index options.
  2. The NASDAQ-100 is a stock market index made up of 103 equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock market.
  3. The S&P 500, or simply the S&P, is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices.
  4. The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow is a stock market index that measures the stock performance of 30 large companies listed on stock exchanges in the United States.
  5. The Russell 1000 Index is a stock market index that tracks the highest-ranking 1,000 stocks in the Russell 3000 Index, which represent about 90% of the total market capitalization of that index.

Important Disclosure

AS OF DECEMBER 9TH, 2020, LIBERTY STREET ADVISORS, INC. REPLACED SP INVESTMENTS MANAGEMENT, LLC (“SPIM”) AS THE ADVISER TO THE FUND. AS OF APRIL 30, 2021, THE FUND CHANGED ITS NAME FROM THE “SHARESPOST 100 FUND” TO “THE PRIVATE SHARES FUND.” THE FUND’S PORTFOLIO MANAGERS HAVE NOT CHANGED. Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus with this and other information about The Private Shares Fund (the "Fund"), please download here. Read the prospectus carefully before investing.

Investment in the Fund involves substantial risk. The Fund is not suitable for investors who cannot bear the risk of loss of all or part of their investment. The Fund is appropriate only for investors who can tolerate a high degree of risk and do not require a liquid investment. The Fund has no history of public trading and investors should not expect to sell shares other than through the Fund's repurchase policy regardless of how the Fund performs. The Fund does not intend to list its shares on any exchange and does not expect a secondary market to develop.

All investing involves risk including the possible loss of principal. Shares in the Fund are highly illiquid, and can be sold by shareholders only in the quarterly repurchase program of the Fund. Due to transfer restrictions and the illiquid nature of the Fund’s investments, you may not be able to sell your shares when, or in the amount that, you desire. The Fund intends to primarily invest in securities of private, late-stage, venture-backed growth companies. There are significant potential risks relating to investing in such securities. Because most of the securities in which the Fund invests are not publicly traded, the Fund’s investments will be valued by Liberty Street Advisors, Inc. (the “Investment Adviser”) pursuant to fair valuation procedures and methodologies adopted by the Board of Trustees. While the Fund and the Investment Adviser will use good faith efforts to determine the fair value of the Fund’s securities, value will be based on the parameters set forth by the prospectus. As a consequence, the value of the securities, and therefore the Fund’s Net Asset Value (NAV), may vary. There are significant potential risks associated with investing in venture capital and private equity-backed companies with complex capital structures. The Fund focuses its investments in a limited number of securities, which could subject it to greater risk than that of a larger, more varied portfolio. There is a greater focus in technology securities that could adversely affect the Fund’s performance. The Fund is a “non-diversified” investment company, and as such, the Fund may invest a greater percentage of its assets in the securities of a single issuer than investment companies that are “diversified.” The Fund’s quarterly repurchase policy may require the Fund to liquidate portfolio holdings earlier than the Investment Adviser would otherwise do so and may also result in an increase in the Fund’s expense ratio. This is not a complete enumeration of the Fund’s risks. Please read the Fund prospectus for other risk factors related to the Fund.

Companies that may be referenced on this website are privately-held companies. Shares of these privately-held companies do not trade on any national securities exchange, and there is no guarantee that the shares of these companies will ever be traded on any national securities exchange.

The Fund is distributed by FORESIDE FUND SERVICES, LLC