Fitbit has earned the title of ‘super dragon’ following its successful IPO, which raised about US$732 million by selling 36.6 million shares. This is the third-largest US IPO of 2015, according to deal tracker Dealogic; and the San Francisco-based consumer hardware company is now valued at about $6.2 billion.
According to Mattermark, Fitbit ended up pricing at $20 per share at opening, rising at more than 50 percent by Thursday lunch time and trading at over $30. This puts Fitbit’s initial IPO value at about $6.2 billion.
In the Grimm Brothers-like world of venture capital, there are unicorns and dragons. The dragon is more majestic than the unicorn and four times as rare. This is because the unicorn is simply a startup that’s valued (on paper) at $1 billion or more, whereas a dragon is a company that returns the entire fund (or multiple entire funds) for firms that backed it.
There’s a good reason why Fitbit has been labelled a ‘super dragon’.
Brad Feld’s Colorado-based venture capital firm, Foundry Group is Fitbit’s largest shareholder, owning 28.9 percent of the company. The firm sold 6 million shares and still owns 43.4 million shares. Based on Fitbit’s $30.40 per-share price at Thursday lunch time, Foundry’s share as a public company is worth about $1.8 billion.
The fund that Foundry’s original 2010 investment came from totalled around $240 million, making an exit worth potentially seven and a half times the size of its fund – hence FitBit’s ‘super dragon’ status.
Prior to the IPO, there was only about US$66 million invested in Fitbit since it’s inception in 2007, according to CrunchBase. The company has experienced significant revenue growth in the last four years, with annual revenues growing from $14 million to $76 million to $271 million to $745 million – a growth rate of 170 precent per year and outpacing GoPro, according to venture capitalist Tomasz Tunguz.
By the end of March, Fitbit had sold over 20.8 million bands at around US$100 per band and operates at roughly 50 percent gross margin.
Fitbit’s founders James Park and Eric Friedman started the company with $425,000 from friends and family who purchased shares at a rate of 4 cents per share, according to Equity Zen. Based on FitBit’s $30.40 per-share price, that adds to about 760 times return on investment for those who held onto their shares.
The founders each retained about a 10 percent stake in Fitbit, meaning that their stock is now worth over $600 million.
It’s worth noting that these returns will only be realised if and when shareholders sell their shares.
Image source: BizJournals.