- Since CNBC chose the 2020 Disruptor 50 list last June, eight of the companies have gone public and several more are planning IPOs and SPACs, opening space on the list for more new companies.
- The stock market returns generated by Disruptor companies, such as Airbnb, Snowflake, C3.ai and Affirm, have outperformed the Nasdaq by a wide margin.
- More of that entrepreneurial wealth is being created at start-ups based outside of Silicon Valley, and that trend is expected to accelerate.
As we call for nominations for the 2021 CNBC Disruptor 50 list, the opportunity for new companies to be selected is bigger than ever.
Since we chose 2020's fastest-growing, most disruptive private companies last June, we've seen more names from that list go public than in any year since the original Disruptor 50 list in 2013. That means that fewer Disruptor 50 veterans — 36 from last year's list — still qualify to be nominated.
The past half-year has been a record one for IPOs and so far there have been eight public offerings from the Disruptor 50: Airbnb, Affirm, DoorDash, C3.ai, Snowflake, Lemonade, Root Insurance, and GoodRx. There have also been two pending SPAC mergers – SoFi and Butterfly Network. And yet another company, UiPath, has filed a confidential S-1 to go public.
These exits, at some massive valuations – Airbnb now has a $108 billion market cap – speak to the maturity of these companies, and just how long they waited to go public. Artificial intelligence company C3.ai was founded in 2009; GoodRx was founded in 2011. These companies had well-established relationships with Fortune 500 business partners before bringing their shares to the public.
The companies on the 2020 list have also seen massive demand for their shares. The Disruptor 50 index, which includes all companies from past lists that have gone public, is up 145% in the past 12 months, compared to the Nasdaq's 42% gain in the same time period. These stock moves are not just because a big first-day pop has become expected for IPOs, but also because the companies' products and services play into the digitization of the economy that has accelerated during the Covid-19 pandemic.
Take the way Affirm enables people to spread out payments for Peloton bikes and other big ticket purchases, a fee-free alternative to a credit card. Or the way Root and Lemonade use Artificial Intelligence to streamline and simplify the process of buying insurance. Snowflake is helping companies move their data into the cloud, and run businesses from anywhere.
This massive wealth creation will have a ripple effect beyond benefitting the angels investors, the VCs, and their limited partners, that backed these companies. The payout to early employees at these companies could create the next generation of angel investors. Those employees who end up selling their shares will have newly-deep pockets, which could both encourage more entrepreneurship and enable them to place bets and seed early-stage entrepreneurs.
And that wealth creation is happening in more places across the country. Last year's Disruptor 50 was the first time that more than half of the companies (33) were from outside of Silicon Valley. That trend, which legendary investor Steve Case calls the "rise of the rest" will be compounded as more tech giants leave the valley and more investment dollars go to other areas.
PitchBook forecasts that 2021 will be the first year that the Bay Area's share of venture capital dollars falls below 20%, while other cities such as Atlanta and Austin draw more entrepreneurs and investment. In 2020, $156.2 billion of venture capital raised in the US; 23% of deals, representing 39% of VC dollars, went to companies headquartered in the Bay area. PitchBook reports that Silicon Valley's share of deal count has fallen every year since 2006.
The fact that the percentage of dollars going to Silicon Valley companies is so much bigger than the number of deals indicates that the companies there are raising more per investment round, the sign of larger and more established companies. PitchBook reasons that it doesn't matter if a company is in the same building, city, state or country as investors, which has somewhat leveled the playing field for investor attention. For the 2021 Disruptor 50 list, we hope access to capital and opportunity isn't limited by location, and we continue to find industry-changing start-ups wherever they happen to be based.
Nominations are open for the 2021 CNBC Disruptor 50, a list of private firms using breakthrough technology to become the next generation of great public companies. Submit by Friday, Feb. 19, at 3 pm EST.