Y Combinator, Palantir and Opportunity Zones

Best of the best

One of Silicon Valley’s most prominent accelerators, Y Combinator, just released a list of the top 100 most valuable companies to graduate from its program.

The list includes some household names like Airbnb (which tops the list with a $30+ billion valuation) and Dropbox, the file-sharing service that hit the public markets earlier this year raising more than $750 million. It also includes some names that are more popular in the tech community like payment processor Stripe and Optimizely, a product testing platform.

One of the most notable trends throughout the list is the dominance of B2B (business to business) Software and Services companies, which make up about half of the startups.

Here are a few more highlights:

• Some of the oldest companies on the list: Reddit (Spring 2005, acquired by Conde Nast in 2006), OMGPOP (developer of facebook games, Spring 2006, acquired by Zynga in 2013), Scribd (digital library, Spring 2006)
• A few of the newest companies on the list: Brex (credit card startup, $1 billion valuation, Winter 2017), Faire (connects retailers to wholesalers, Winter 2017), The Athletic (sports news, Spring 2016)
• The total value of the 100 companies is more than $100 billion and have created more than 28,000 jobs, according to the list.

A tweet from Austen Allred, Co-Founder and CEO of Lambda School  (YC class of Spring 2017) breaks the list down a little further:

 

YC has funded ~1,900 companies.

93 are valued at >$100m
19 are valued at >$1b

Obviously this is oversimplified, but a YC founder, on average, has a 5% chance of building a $100m company, and a 1% chance of building a $1b company.

And that's probably low, as most are recent.

— Austen Allred (@Austen) October 18, 2018

 

Palo Alto’s best kept secret

Little-known Palantir Technologies Inc, a big data company co-founded by Peter Thiel, is considering going public at a valuation of up to $41 billion, according to the Wall Street Journal.

The company was founded in 2003 and created a highly-profitable niche in conducting data analysis for government agencies, and its products were reportedly used to help track down Osama Bin Laden (Bloomberg wrote a great piece in April on Palantir).

So, why is the reserved and secretive data-mining company thinking of going public now, more than 15 years after it was founded? The WSJ reported that both investors and employees have become frustrated that the company is still private and they haven’t been able to profit from their equity.

My thoughts: Thiel and company (a lot of his associates) have always seemed to march to the beat of their own drum. Investor and employee pressure might be part of it, but I think there are two other big factors. First, equity markets are hot right now and valuations are high. If a company’s looking to go public at a huge valuation,  — which most are — now looks like a pretty good time to do it. Palantir was valued around $20 billion in 2015 when it raised its last round of funding.

Tech companies are also under an immense amount of scrutiny over how they handle data. Palantir’s business is data, and if they go public, it could put them at the center of that debate. Going public in the near future could be a way for Palantir to get ahead of the inevitable crack-down on data privacy, and possibly, steer the conversation.

The rich stay rich — but also spread the wealth?

Recode reporter Theodore Schleifer published a great story this week about successful tech billionaires moving their money into “Opportunity Zones,” a new type of investment created by the 2017 tax bill.

Sean Parker, who spent time as an executive at Facebook in its early days, founded the Economic Innovation Group in 2013, a policy group that focuses on primarily on distressed communities. EIG was one of the biggest supporters of including Opportunity Zones in the tax bill, and according to the website Parker “was the primary architect” behind them.

The goal of Opportunity Zones is to divert capital to underserved communities through tax incentives. Traditionally, there’s been huge concentrations of capital in major cities like New York, Boston, Chicago, San Francisco, etc.

Opportunity Zones could be a way to bring money to the “flyover states,” or areas of the country that typically don’t see a consistent flow of capital. But, some are worried the concept might not yield its intended results, and could keep the rich well, rich.