In 2016, my firm published a blog post arguing that unicorns are overrated. Valuation alone doesn’t mean an investment is a winner. We proposed a better definition for the best startup investments and suggested the industry celebrate these instead. We dubbed them “Triple Crowns,” since they had to meet three metrics regardless of whether or not they reached the $1 billion+ valuation of a unicorn:
1. A cash-on-cash multiple of at least 10X
2. An IRR of at least 100 percent
3. At least $1 million in VC investment
Since our firm has among the most complete database of U.S. venture financings and outcomes in the industry, we decided to follow up on our initial post by identifying and honoring the U.S. venture Triple Crown winners that saw exits in 2017.
And the winners are …
To check out the details on each of these Triple Crowns, including the founders and CEOs, which VCs invested, and who was on the Board, keep scrolling to the table below.
We are committed to keeping any information in our database confidential unless we receive permission and confirmation of the facts from at least one of the key players involved. The above financings are the ones for which we received permission and that appear to meet each of the three core conditions. For IPOs, we used the stock price six months after the IPO or 3/31/18, whichever was earlier, regardless of when each VC actually sold their stock.
Triple Crown characteristics
We found some facts about these seven Triple Crowns interesting:
- Only four involved unicorns
- All were in venture centers: three in San Francisco, and two each in New York and Los Angeles
- They were evenly spread between Seed, Series A, and Series B
- All were in tech or consumer, none in life sciences (although there have been life science Triple Crowns in prior years).
The three Triple Crown metrics are by nature arbitrary (as is the $1 billion unicorn metric), and there were, of course, many fantastic outcomes that didn’t quite meet one or more of the criteria. For example, Baseline led the seed round for Stitch Fix, which easily met the multiple and IRR hurdles, but the raise was just under $1 million. Similarly, Mayfield led the Moat Series B, which met the raised and multiple metrics but not quite the third metric.
The Triple Crown’s bias towards earlier stage investments
The Triple Crown designation marks venture investments that have generated the highest absolute returns. It does not factor in risk. It will therefore tend to favor earlier stage investments, which carry greater risk but have higher expected returns when compared with later stage investments. On a risk-adjusted basis, it is possible, if not likely, that more later stage investments would have been identified as winners.
We hope you’ll reach out if there are any financings we missed in companies exiting last year that you believe met all three Triple Crown criteria. We will update this post with any corrections.
Congratulations to the entrepreneurs, VCs, and independent directors who were responsible for such fantastic 2017 exits!
David Coats is Managing Director at Correlation Ventures.