E91: xAI raising $6b at $20 valuation or not?; Chime at $16b, +185% above 2ndary market valuation?; Lightspeed continuation fund sign of 2ndary market maturation | Pre-IPO Stock Podcast – Jan 29, 2024 | Clint Sorenson, Nick Fusco, Aaron Dillon

This Week in Pre-IPO Stocks

00:14 | xAI raising $6b at $20 valuation or not?
- xAI is Elon Musk’s large language model; X owns 25% of xAI
- Media stated xAI was raising $6.0b at a $20b valuation, $500m already raised
- Musk posted on X that “xAI is not raising capital and I have had no conversations with anyone in this regard” … that seems pretty clear
- Musk's infrastructure and data resources at X and Telsa give him a competitive edge
- Quality of X data for training AI models may have poor data integrity (i.e. inaccurate facts posted by X users)
- xAI must need the capital if it aims to follow OpenAI, Anthropic, Cohere and their needs for chips/GPUs
06:54 | Chime at $16b, +185% above 2ndary market valuation?
- Chime is a fintech challenger bank that primary services low income customers
- Chime raised at a $25b valuation in Sep 2021, I have them at $5.6b implied secondary market valuation
- Chime has raised $2.65b in capital to date
- A 10 year Chime investors says Chime is closer to $16b to $20b
- Chime at 14.5 million customers and $1.8b in 2022 revenue ... thats a 8.8x revenue multiple to meet a $16b valuation
- Is 8.8x too high for a business of this type?
- Investing in profitable, fast-growing companies with depreciated secondary market values is an interesting investment thesis
- Important to have a long term investment horizon when investing into the private markets
16:03 | Lightspeed continuation fund sign of 2ndary market maturation
- Lightspeed Venture Partners is moving 10 investments worth $1b+ into a continuation fund and allow LPs to sell their interests
- A lot of secondary deals get done through buying/selling LP interests ... deals happen away from the company and do not require board approval or get ROFRed
- Lightyear has investments in companies like Stripe, Ripple, Anduril, Stability AI, Alloy, Cohere … tbd if these companies will be in the continuation fund
- Liquidity is a positive for investors and secondary market trading may be better vs VC funds taking loans against portfolio to meet investor liquidity needs
- SPVs and continuation funds are a positive for private stock market as its a sign of a maturing market, creating more investor comfort in the space