The three VC firms which invested in UiPath at its seed round have made what is likely to be the greatest ever European venture bet. They're set to generate more than a 220,000% return on their money when the company lists in New York in the coming months.
Earlybird's Digital East fund led a $1.6m round in the then little-known Romanian enterprise software company in 2015, alongside Seedcamp and Credo Ventures. According to calculations by Sifted*, these three seed investors retain just over 10% of the company. Last month, UiPath was valued at $35bn and said it was aiming for an IPO.
That means that in six years the three VCs will soon have turned $1.6m into at least $3.5bn, which is a 220,000% increase or a 2,200x return. Bitcoin, by comparison, has had a 100 times return since 2016.
It's the kind of deal that VCs dream about.
"It's the kind of deal that VCs dream about," said one VC at a top-tier firm which was not in the deal — but wishes it had been. "Seriously, I have actually dreamt about being in a world where we were in UiPath and they are always the nicest dreams."
The same person said they did not want to be quoted in Sifted by name because they did not want to draw attention to the fact that their firm "missed such a massive deal."
The greatest ever European VC deal?
As far as I know, this seed deal is by far the best in European history.
Spotify, previously the largest European tech IPO, went public for $26.5bn in 2018, earning early investors in the $21.6m Series A like Creandum, Northzone and Shakil Khan, a tidy return. But there was not, as far as Sifted understands, a seed round for Spotify; initially, cofounders Martin Lorentzon and Daniel Ek funded the business with their own money. Spotify's price at IPO was also much less than UiPath's current $35bn valuation — which is also only likely to rise when it finally lists in New York.
Best VC deals of all time
There have been better VC bets globally however, although not all that many. Here is a list of some of the best VC deals of all time (if you can think of any others, please get in touch at firstname.lastname@example.org):
- Y Combinator has made some staggeringly good bets with returns that are almost certainly higher than the UiPath seed round. The famed accelerator provided $20,000 in exchange for a 6% stake in rental marketplace Airbnb, which IPOd last year at a $75bn valuation. According to Crunchbase estimates, it retained 3.3% of Airbnb shares, worth $2.25bn at IPO. Turning $20,000 to $2.25bn is a 112,500x return (a lot more than the UiPath deal!).
- Y Combinator also put $120,000 into Doordash, the other big tech IPO of last year, at a $39bn valuation. According to the same Crunchbase estimates, Y Combinator would retain 1.7% of Doordash, worth $663m at IPO, which is a 5,500x return.
- South African media company Naspers has not done too badly either. It paid $32m in 2001 for a 46.5% stake in Tencent, which at the time was a small company but today the world’s biggest videogame company and home to the hugely popular WeChat social media platform. The value of the stake by 2018 had ballooned to $175bn, when Naspers raised nearly $10bn by selling it down from 33% to 31%. That's a 5,400x return for Naspers.
- Facebook’s $22bn acquisition of WhatsApp in 2014 was the largest private acquisition of a VC-backed company ever. It was also a big win for Sequoia, the company’s only venture investor, which turned its $60m investment into $3bn. This is not bad, but only a 50x return.
- Facebook’s IPO at a $104bn valuation was a huge success for early investors Accel and Breyer Capital. The firms led a $12.7m Series A into Facebook in 2005, taking a 15% stake in what was then called 'Thefacebook.' But again, that's only a multiple of 1,200x — far off 2,200.
- US firm Sutter Hill Ventures was reportedly the biggest winner of the listing of Snowflake, the software company that IPOed at a $70bn valuation and is now worth $88bn. They held a stake worth $13.3bn, when counting shares held by the fund and its individual partners and affiliates, according to the Financial Times, after a $5m round in 2012. All else being equal, that would be 2,660x.
- Another notable investment was that of Jeff Bezos, David Cheriton and Ram Shriram in the $1m angel round for Google in 1998. According to reports, Bezos put in $250,000 for 3.3m shares in Google... which would be worth $6.2bn at today's prices (although he sold, apparently).
*A note on the calculations
The calculation for working out that the three early investors in UiPath turned an initial $1.6m seed round into more than $3.5bn involves a little educated guesswork.
Essentially, the seed round was $1.6m at a roughly $8m valuation giving the three investors 20% of the company. None of this is public apart from the $1.6m put in, but this assumed valuation is based on a typical round at that time.
We then know that the Series A in 2017 led by Accel was $30m, because it is public. According to Crunchbase, this was at a $70m pre money valuation.
Then the numbers become more public. According to Dealroom, the $153m Series B was at a $1.1bn valuation; the $225m Series C was at a $3bn valuation; the $568m Series D was at a $7bn valuation; the $225m Series E was at a $10.2bn valuation; and then the $750m Series F was at a $35bn valuation.
As each of these rounds come with a valuation, you can work out the dilution of each round (e.g a $153m Series B at a $1.1bn valuation means investors got 7% of the company). Going through each round in turn, you can work out that the seed investors would be left with roughly 10% from that initial $1.6m.
Admittedly, this does not take into account any of the follow-on rounds by Seedcamp, Credo and Earlybird. Their whole investment may have ended up being a little more than $1.6m. It’s hard to know exactly. If you take the follow-on rounds, Sifted guesses that they may have more like 13% of the company at IPO.
What we can say is that the original $1.6m will become roughly around $3.5bn, or whatever 10% of the final IPO price turns out to be.
One other thing to note about the UiPath seed deal is that part of it was done by Seedcamp Fund III, which also invested in Revolut, the fintech valued at $5.5bn. It might turn out to be the greatest European seed fund of all time.