For many years, emerging companies and the majority of investors connected through the transaction of Initial Public Offerings. A creative private company that is growing exponentially would go public, allowing investors the opportunity to participate in that growth. This transfer of capital and creativity drove the economy for decades.

But times have changed, and many of the most exciting growth companies are electing to remain private longer. This means that the average investor today has been more or less cut out of that growth phase. As many know, by the time an exciting company IPOs, the idea of owning a company at the “ground floor” is more myth than reality.

By the time an IPO opportunity is presented, three to four rounds of private investment have taken place at steep discounts. However, investment fund GSV Capital Corp. (GSVC) is one way investors can gain exposure to these opportunities.

GSV Capital, led by Michael Moe a best-selling author named “one of the best stock pickers in the country” by BusinessWeek, is a publicly traded investment fund dedicated to exposing clients to promising private companies, which primarily are headquartered in Silicon Valley hence the company’s name, ‘Global Silicon Valley’ or GSV.

Our business model is all about how we identify and access the fastest-growing, top venture-backed companies in the world,” says Moe. “We operate out of Silicon Valley, where a lot of these companies are headquartered. So, we use our network and our experience to find ways to get involved with these companies.”

Examining the company’s most recent quarterly results, it is clear that GSV Capital’s model is continuing to offer investors an entryway to the next big market disruption and making gains doing so.

Picking the Game-Changers of Tomorrow

GSV Capital reported net assets totaling at an approximated $202.1 million, or $9.11 per share, at June 30, 2017, as likened to $8.83 per share at March 31, 2017 and $8.66 per share at December 31, 2016. Furthermore, Moe and the GSV team are excited about the remainder of year for IPOs and believe more exciting mergers and acquisitions are on the horizon.

“We are pleased with the progress GSV Capital has made in the second quarter, as the overall portfolio continues to perform well, and concentrate on meaningful positions in leading private companies such as Palantir, Spotify, Dropbox, and Coursera,” said Moe during the company call. “We are optimistic that a more robust IPO market and continued M&A activity will be a positive catalyst for our portfolio, but we remain determined to take proactive steps to maximize shareholder value. As of June 30, 2017, GSV Capital’s top 10 positions accounted for approximately 63% of the total portfolio at fair value versus approximately 54% at the same time last year. Our three largest investments; Palantir, Spotify and JAMF Software represented approximately 50% of the total portfolio at fair value. At quarter end there were 38 companies in our portfolio compared with 47 a year ago; this all reflects our continued strategy of consolidating the top, the portfolio around top positions and leading names. So in other words we’re going to put more money in fewer companies.”

In the same call, Moe talked about the approved $5 million discretionary share repurchase program that was approved by the board and also discussed some important changes to personnel.

“We are pleased to announce that GSV Capital’s lead director, Mark Klein, will transition to the role of CEO, effective August 11, 2017, where he will focus on enhancing shareholder value and the operations of the fund,” Moe commented. “Moving forward, I will continue to serve as Executive Chairman of GSV Capital’s Board of Directors and will focus on investment strategy.”

Breaking Down GSV Capital’s Positions and Their Future Potential

Of GSV Capital’s five investment strategies or themes, education holds the largest share at 36.7% of the portfolio, while cloud computing and big data hold a close second at 32.7%; social/mobile represents 18.8%, marketplace 11.2% and sustainability 0.6%.

Here is a breakdown of GSV Capital’s key holdings by company:

Palantir – Holding a little more than 13% of the company’s portfolio with a value of $37 million, GSV Capital sees this big data disruptor as a quiet giant. This company may not be the household name like Spotify or Snap, but it is used by leading government, commercial and non-profit institutions around the world to solve the most complex problems. Earlier this year, it was reported that Airbus has tapped Palantir to help accelerate production of its new A350 aircraft, potentially saving the European Airspace Group hundreds of millions of dollars over the next few years. This adds to a bluechip list of corporate clients that includes Merck, AXA, BP, Credit Suisse, Duetsche Bank, Glaxo SmithKline, and Standard Chartered.

Spotify – GSV’s second largest position is with the Scandinavian music streaming behemoth that can boast over 60 million paid subscribers and growing. Moe and his team have invested more than 9% of the company portfolio in Spotify, which after teasing an IPO hit a target valuation of $13 billion, which would place the company ahead of Pinterest and SpaceX. Spotify has added about 10 million subscribers over the last four weeks. Apple Music has added just 8 million subscribers over the last six months. In addition, Spotify is planning an X-Box One app that could reach more and more users on the Microsoft console.

Spotify is also considering a direct stock listing, which means going public without investment banks or raising money, making GSV Capital one of the few ways to own shares of Spotify pre-IPO.

JAMF Software – Holding 7.9% of the GSV portfolio is the IT management software company deployed by Apple and other large educational institutions. JAMF’s product, known as the Casper product suite, allows IT administrators to deploy, provision and distribute applications, configure and remotely control devices, update software across devices, enhance security and allow for disk encryption. The GSV team loves this company because they are the growing go-to platform for IT administrators around the country.

Coursera- Recently, Coursera raised over $60 million in a valuation estimate at $800 million subsequently causing a second quarter valuation increase at $3.9 million. The Massive Open Online Course (MOOC) pioneer is GSV’s fourth largest position at 6.5%.

Dropbox – with over 500 million users and 200,000 business customers including a majority of the Fortune 500 companies, the cloud-based digital file storage company has raised over $600 million from a syndicate of investors including Sequoia, Benchmark, Accel, Goldman Sachs, Blackrock, Greylock and Morgan Stanley. With the fifth largest position at 5.3% of the total portfolio, GSV likes this company because of its pedigree and that it recently announced it was profitable on EBITDA basis. On July 27, Bloomberg reported the company is expected to hire Goldman Sachs as a lead advisor for potential IPO which could come this year.

These exciting companies represent a significant slice of the GSV pipeline and with the broader market rising – the S&P 500 is up over 10% and the NASDAQ is up over 18% on the year – the IPO market looks promising the rest of the year.

As evidence, according to Renaissance Capital, in 2017 to-date there have been 88 U.S. IPOs demonstrating a 57% surge over the same period last year. IPO profits have exceeded $22 billion which compares to $18.8 billion in the whole year of 2016. In the first half of the year there were 24 venture capital backed IPOs, which generated $5.9 billion in proceeds, this parallels to 19 IPOs that produced $1.3 billion in the first half of 2016.

All in all, the annual IPO market heating up is not only beneficial for the economy, but especially great for GSV Capital shareholders.


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