So, How Much is Stitch Fix Worth?

Snap and Blue Apron’s disastrous 2017 IPOs left Wall Street tech investors with a bitter taste in their mouths. Over the summer, pessimists even went so far as to predict that these two stock market flops would impede other companies’ efforts to go public, including Uber and Dropbox.

Uber and Dropbox haven’t gone public yet, but a group of healthy tech companies made some significant inroads into the stock market in the last two weeks. Open source database company MongoDB went public two weeks ago at a $1.5 billion valuation, followed by cybersecurity company ForeScout, which saw its market cap rise by 15% last weekend to $934 million.

At about the same time, two high-profile tech companies, online fashion shopping service Stitch Fix, and marketing email company SendGrid, filed their S-1 forms. Worldwide meal kit delivery startup HelloFresh has expressed its appetite to go public and is aiming to do so soon at a $1.8 billion valuation, ignoring Blue Apron’s challenges in the market from last June.

The public tech market is experiencing its best time ever, with the NASDAQ breaking new records every month. The NASDAQ has been soaring, having passed the 6,000 point mark for the first time last April.. With Apple gaining 35% of its stock price since the beginning of 2017, Google adding 22.7%, Facebook 46%, Oracle 29%, and Amazon 30%, it’s no wonder that others want to join the party.

The S-1 documents filed by Stitch Fix and SendGrid last month gave us some sense of their growth and the good momentum they’re experiencing at the moment. Yet, they did not disclose some critical numbers, such as their valuation and churn data. Using NLP and AI, we might be able to assess both companies’ level of growth and success to complete the picture described in the filings.

In order to learn more about these firms and their prospects, let’s use Zirra’s company analysis platform. Zirra has built an automatic process that delivers insightful outputs on private companies creating high-level analytical insights within seconds. Zirra collects and aggregates data from a myriad of public and private information sources and then utilizes Natural Language Processing (NLP) techniques to process this large volume of unstructured text and data.

**Get Insights on Any Startup at Zirra.com**

Stitch Fix

Stitch Fix is one of the biggest surprises in tech and e-commerce in 2017. The online fashion retailer sends its customers a package with five items, a “fix,”  according to his or her size and style. On its face , just another Silicon Valley “kit delivery” startup. But Stitch Fix’s numbers are very impressive: the company’s revenue grew by almost 34% to $977 million in the 2017 fiscal year (which ends in July), with a net loss of only $1 million. That’s almost a billion dollars in revenue from 2.2 million active clients, not bad for an online fashion company that was founded just six years ago.

Now, let’s ask Zirra’s company analysis bot, Emmet, about the risk and success criteria we need to know about Stitch Fix. Within seconds, Emmet pulls out the following output:

Source: Zirra

In terms of successes, Emmet mentions the extensive media coverage, the fact that Stitch Fix has recently begun a funding process (IPO) and its many patents and trademarks. As far as risks, Emmet mentions a few challenges: the highly competitive market (with the likes of LE TOTE and Trunk Club) and the fact that the company hasn’t raised much more capital than its competitors.

Emmet also mentions some legal issues that Stitch might be involved in. In order to locate the exact problem, let’s go to Zirra’s homepage and search for Stitch Fix in the search line. Then we’ll scroll down to the Latest Events section and click on “legal problems”. The linked article tells us that Stitch Fix was found in the eye of the hurricane of the sexual harassment claims against Justin Caldbeck from Binary Capital. While Caldbeck was an associate at Lightspeed, one of Stitch’s investors, founder Katrina Lake, accused him of sexual harassment. According to Axios, Lightspeed compelled her to sign a non-disparagement agreement to not sabotage the next financing round. You will not find that in the S-1 document

Source: Zirra

Emmet also flagged Stich Fix’s high number of open positions, which can be a sign of future growth, as a risk factor. Double-checking this with LinkedIn’s Total Employee Count dashboard shows that the company has hit a plateau in employee growth. Did Stitch cut expenses in order to show profitability before filing its S-1? Or else, had its excessive growth in 2015 and 2016 forced it to slow its expansion in 2017?

Source: LinkedIn

**Get Insights on Any Startup at Zirra.com**

Let’s look at another important indicator, traffic. According to SimilarWeb, a service that monitors web traffic, the number of visits to Stitch Fix’s website has grown significantly in 2017: from January to June 2017, traffic doubled. Yet, this growth isn’t coming from Stitch Fix’s home market. In fact, traffic originating in the U.S. decreased by almost 3% in this period, a bad sign for a business deeply rooted in that country.

 

Source: SimilarWeb

So, after considering some company health indicators, let’s answer Stitch Fix’s valuation riddle. Let’s ask Zirra’s valuation calculator, which estimate a company’s valuation, had it been a public company. According to Zirra, Stitch Fix’s pre-money valuation is estimated at $600-$700 million. In the case that the company will file for an IPO, it can pursue a valuation of $800-$900 million as a public company (or else would it get acquired).

Source: Zirra

The Zirra valuation process involves both intrinsic and relative valuation algorithms. The intrinsic data includes revenue and expense estimations, traffic trajectories, investment history and velocity, all based on aggregated sources. In the relative analysis, data is compared and benchmarked with a database of thousands of companies,controlling for stage, space, size, and trajectory.

Let’s evaluate SendGrid and HelloFresh, two companies that plan to go public very soon. SendGrid is estimated at $360-$380 million pre-money valuation, and up to $600 million if it chose to go public right now (read the full SendGrid Zirra Premium Insight Report); Germany based HelloFresh is estimated at $1.5-$1.6 billion, and up to $2.2 billion in the case of a liquidation event. In comparison, competitor Blue Apron is now traded at a $952 million valuation (read the full HelloFresh Zirra Premium Insight Report)

Zirra has also valued some of the recent tech IPOs. MongoDB, trads on the NASDAQ at $1.46 billion, but is valued by Zirra at $1.7-$1.8 billion, while ForeScout, now traded at $916 million, can pursue up to $1.4 billion if bought.

**Get Insights on Any Startup at Zirra.com**

Deciphering Magic Leap’s History with NLP

Companies lead interesting lives. They grow, contract, thrive or pivot, and their revenues are either increasing or they are counting on continuous funding to keep alive. They hire key people, then they lay off some of them, while they are sometimes the ones being left for good. They sue some company, only to be sued by others. They produce intellectual property hoping to be bought, or they buy other companies for their intellectual property.

Companies in all sizes and shapes experience innumerous events in their lifetime, but as a general rule, t is always very difficult to follow them. Startup databases such as CrunchBase or Pitchbook present lists of basic events such as funding rounds, key hirings, lists of investors and investments, along with a list of the recent relevant news articles. Yet, the information they provide is basic, and not particularly helpful for those who look for a higher resolution data on companies.

Digital company analysis startup Zirra has built an automatic process that delivers insightful outputs on private companies, including a list of possible competitors, their relative level of competition, web traffic, and an automated list of risk and success criteria, in addition to a map of meaningful events during a company’s life. Its proprietary technology allows it to create high-level analysis insights within seconds.

Among the meaningful events detected in the process are product launches, key people joining or leaving the company, mergers & acquisitions, legal issues, partnerships, and funding rounds. The main difference between Zirra’s platform and databases such as CrunchBase, CB Insights or Pitchbook is the use of technology to extract and analyze these meaningful events.

How does Zirra do it? Zirra collects and aggregates data from a myriad of public and private information sources, including structured directories, semi-structured databases, and completely unstructured text. It then utilizes Natural Language Processing (NLP) techniques to process this large volume of unstructured text and data.

After parsing out an article’s text, Zirra uses entity recognition to find mentions of companies in each article, and then link the article to each company that was found within. Currently, finding events is done using a pattern matching based approach, but machine learning trained models that identify events are just around the corner on the development chart.

After patterns are matched, a process of entity recognition on the matched portion begins so the event can linked to accordingly (i.e, WeWork is in partnership with Airbnb), also making sure that multiple links that need to identified as a single event are grouped together.

Zirra’s advanced capabilities in identifying meaningful events in a company’s lifetime is still in beta. However, it is the first and only service capable of categorizing forgotten or lesser known events, putting them in the right context and chronological order, thus helping investors, analysts, entrepreneurs, and business development managers track a company’s behavior both historically and in real time.

Let’s take AR tech company Magic Leap, who recently raised $502 million in series D, as an example. Searching for the company in Zirra’s homepage will generate the following timeline:

Source: Zirra.com

Let’s pick April 2017, a busy month for Magic Leap. As shown above, Zirra has detected a partnership between Magic Leap and CG animation studio Weta (event 1). Actually, there’s nothing new about the partnership, which goes all the way to April 2016, but a detection of a mention in the New Zealand press about the ongoing partnership tells us that the partnership is still active. This is an important sign in a world where partnerships can fall apart quietly.

Events 2,3, and 4 are actually connected. Zirra detected Magic Leap’s intention to buy Oscar-winning animation studio Moonbot (3), an event that resulted in hiring most of its artists and animators instead. As none of the founders joined Magic Leap (3), the algorithm detected officers leaving the company. At about the same time Magic Leap was rumored to buy Moonbot, it already had completed the acquisition FuzzyCube, a Texas-based game studio founded by former Apple employees (4).

Finally, the algorithm detected a departure from Magic Leap after BuzzFeed’s report about the lawsuit filed against Magic Leap by its former VP of strategic marketing, who alleged that she was fired after trying to correct the company’s gender imbalance. (5). The legal battle appeared later in Magic Leap’s timeline (see below).

Meaningful events detection is still a challenge, and Zirra’s product is still in beta. If you find any inaccuracies, please let us know. Detailed feedback is constructive, and welcomed, as meaningful events detection can only improve with your help. Please try it in Zirra’s homepage –  search for a company and scroll left to see its entire history. Click ‘view sources’ to see the origin of each event’s detection and let us know what you think.