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Stocks are down, we haven’t seen S-1 filings from startups we anticipated would go public this year and some newly public companies are seeing their valuations plummet.

There have only been a few venture-backed companies to go public so far this year. Health care startup was the first, followed by mattress startup . Let’s take a look at how they’ve fared dealing with the choppy conditions of the market.

One Medical

IPO Price: $14

Open Price on Wednesday: $20.31

One Medical’s stock is well above its IPO price from January, but it plummeted last Thursday to $19.10 as the coronavirus situation in the U.S. and beyond got worse. The stock recovered a bit to $21.30 by the close of market on Friday after President Donald Trump addressed the nation about efforts to combat the effects of coronavirus, and the Federal Reserve said it would give more liquidity to the market.

It makes sense that One Medical is doing well, relatively speaking. Its stock hasn’t been battered as much as some others, likely because it is a health care company. Since the company went public at the end of January, its stock has been on a bit of a roller coaster ride, but it looks like it’s climbing up. It opened on Wednesday at $20.31.

Casper

IPO Price: $12

Open Price on Wednesday: $4.19

Casper’s IPO did not go well. The company initially priced its shares between $17 and $19, but had to lower that range to $12 to $13 before ultimately pricing at $12. The company was last privately valued at $1.1 billion but went public with an IPO price that gave it a valuation of less than a half-billion dollars. Since then, its stock price has been on a pretty steady decline. Casper’s stock opened at $4.19 on Wednesday, and it’s all-time low was $4.05.

Consumer-facing companies are seemingly taking one of the  worst beatings in the market. Casper’s public debut was lackluster, to say the least, and it’s been a little over a month since its rocky start and things aren’t looking up.

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We could go on.

And then there are evergreen firms. In a nutshell, evergreen firms have open-ended fund structures with no termination date. As such, they are permitted to recycle capital from realized returns and aren’t bound by the same time constraints as a traditional VC firm. That means these investors are well-equipped to sit out sudden shifts or extended downturns in market cycles (such as the one we are potentially about to experience).

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The fact that evergreen firms can invest in a company through multiple stages means they aren’t as pressured to exit. Traditional venture funds often have less flexibility and may be pressured by their fund structure to cash out earlier than an evergreen fund might. Limited partnerships are typically family offices.

Recently, I happened to talk to two evergreen venture firms with the intention of getting a better understanding of what they do, and that got me thinking:  What advantages might the evergreen structure provide in fast-changing market cycles?

To find out, I talked to partners from and , both of which are evergreen funds – there’s estimated to only be a handful of such firms.

I also talked with a startup founder who has been backed by one of these firms to learn why he went that route.

Let’s dive in.

Maverick Ventures

Maverick Ventures launched in 2015 as the venture arm of 25-year-old, $8 billion hedge fund . The firm currently has $382 million in capital commitments and in a short amount of time has built up an impressive portfolio.

For context, over time, Maverick Capital and Maverick Ventures combined have deployed $1 billion in 94 private companies, had 24 IPOs  or acquisitions and helped create 11 unicorns. It was also among the first investors in . Rather than mixing public (hedge fund) investing and private investing, it launched Maverick Ventures.

The two entities have seen notable exits in DNA sequencing startup being by for $1.2 billion in 2018; going public in 2018; being acquired by for $4.4 billion in 2016. Another portfolio company, concierge medical services provider , recently went public.

Maverick has also invested in the likes of direct-to-consumer wellness brand (recently re-branded to hims and hers), Indian digital health care platform ; health benefits platform and India-based scooter startup .

I hopped on the phone with , managing director of Maverick Ventures, who told me that when the firm kicked off five years ago, evergreen funds were actually “very unheard of.”

The fact that Maverick has hedge fund roots, giving the firm a footing in both private and public markets, provided a unique perspective, he said. (Hedge funds are financial partnerships that use pooled funds and employ different strategies to earn active returns for their investors, according to .)

Maverick’s strategy has always been to invest in the series A-C stages, which is earlier than hedge funds in terms of venture.

As you can probably tell from some of the investments mentioned above, health care IT makes up nearly 60 percent of the firm’s portfolio. Software in general is big for Maverick Ventures and the remainder of its portfolio is split among B2B and consumer startups.

“We don’t have fund one, two and three,” Kinsella told me. “It’s one perpetual pool of capital.”

The fact that venture-backed businesses have been staying private longer is not always compatible with the seven- to 10-year fund life that typical funds currently have, said Kinsella.

“Most firms have not reserved enough to support a company through its private life. Sometimes, they need to force an exit and that is not always an optimal outcome for an LP or company,” he explained. “With us, there’s no end to the fund life. So how we invest is never based on the dynamics of the fund itself. It’s always an economically rational decision.”

He admitted, however, that evergreen structures are not for everyone when it comes to LPs.

“If you’re a pension fund or an endowment, your capital needs might be more near-term so you might be more apt to go with a closed-end fund to make sure you get your capital back at a certain point of time,” Kinsella told Crunchbase News.

As such, evergreen fund structures lend themselves well to family offices, which usually have a longer time frame when it comes to investing.

“They usually don’t want capital in the near-term for tax purposes,” Kinsella said. “They’re more focused on compounding their returns. That said, there are endowments that have invested in evergreen funds.”

Maverick’s model is based on that of . In fact, Sutter backed two of the companies that Maverick Ventures Managing Partner had started.

Founder perspective

I talked with , founder of newly branded, about his decision to take money from Maverick during his company’s seed round in the summer of 2017–just months before its launch. The company, formerly known as hims, shipped its first boxes to customers in late 2017 and saw $1 million in sales its first week.

Since then, the company has raised over $200 million with Maverick participating in nearly every round since. It also has grown to more than $100 million in revenue. The company , with over a $1 billion valuation, in early 2019.

For Dudum, acknowledgement by Maverick that health care-related businesses generally take longer to incubate was crucial in its decision to go with an evergreen firm as an investor.

“We were going after a really tangled complicated problem,” he told me. “So having an evergreen fund with that type of time horizon capability was really beneficial. The fund structure lent itself well to the nature of our business.”

Long-term committed capital was appealing to Dudum, who wanted investors “around the table at every stage of the company’s development.”

Additionally, Maverick’’s “unique” health care expertise has been valuable, with tactical advice through all the company’s stages, he said.

“We recently brought on a chief medical officer, who was at ,” Dudum told me. “Maverick was absolutely critical in making that happen.”

Thomvest Ventures

San Francisco-based Thomvest Ventures is another evergreen fund based in San Francisco. Thomvest Ventures is not a traditional fund that raises capital from limited partners (LPs). Instead, it is investing the capital of one individual, , whose family owns the majority of Thomson Reuters.

I talked with , a managing director, who told me that there’s been an increased prevalence of large family offices in the VC industry, which has in turn been increasing the number of evergreen funds.

Butler has been working for Thomvest for two decades, and over that time he’s “not bumped into that many firms that look like us.”

With $500 million under management, Thomvest Ventures is one of the larger evergreen funds around. Its sweet spot is investing from seed to Series C.

Personally, Butler has backed nearly 60 companies, such as crowdfunding platform , as well as and small business loan provider . He saw a few exits late last year, including being to for about $750 million and for $150 million.

“It really does come back to the relationship with the principal sponsoring the fund,” Butler told Crunchbase News. “In some ways, corporate VCs could be quasi-evergreens because they too set aside funds and incentives. There’s that balance sheet of a corporate partner you could go back to.”

Over the past seven to eight years, Thomvest has become vertically focused, “which has been a tremendously good thing” for the firm, Butler said. The three verticals it’s focused on are fintech, cybersecurity and adtech/martech/salestech. Within that, it has a particular interest in real estate technology, believing that it “feels like where online credit was four years ago.”

“It’s really coming into its own,” he said.

Thomvest prides itself on deep research projects that it conducts twice a year for months at a time–taking inspiration from journalists (which makes sense given its origin), according to Butler. The company’s principals and associates focus on a specific vertical, and consider things such as where that industry is going, and whether they are at the right place at the right time.

“Then we go look for the right team,” Butler said. “I believe the best companies have all sorts of investors competing to become an investor. It’s insanely competitive.”

As we head into a challenging market cycle, it will be interesting to see what kind of role evergreen funds will play in supporting private companies and their ability to weather a potential (and likely) downturn.

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Shares of , a provider of primary care clinics and telemedicine, closed up nearly 60 percent in first-day trading a month ago. Since then, it’s largely held on to those gains.

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, a benefits management focusing on fertility, meanwhile, has seen its shares roughly double from its initial offer price back in October. While the broader markets have swooned, Progyny has held strong.

Now, another well-funded health service company is betting investor enthusiasm for the space will trump market skittishness. , a service provider that serves as a kind of go-between for consumers, employers and health insurance companies, is seeking to raise up to $100 million in an IPO, according to a prospectus filed late Friday.

The ups and downs of IPOs

Like most venture-backed companies on the IPO path, Accolade is posting both strong growth and persistent losses. Its most recent financials are for the ninth-month period ending Nov. 30, for which it reported revenue of $88 million, and a net loss of $49 million. For the corresponding period a year earlier, revenue was $60 million, with the same net loss of $49 million. (Accolade operates on a fiscal year ending in February, so results for its last full fiscal year are not yet available.)

The company’s pitch to investors is that its platform will see continued large-scale adoption as health care plans and services become increasingly complicated for people to navigate. Its customers are primarily employers that deploy Accolade to provide employees and their families “a single place to turn for their health, healthcare, and benefits needs,” per the IPO prospectus.

Accolades core offerings includes a software platform backed by a support staff of health assistants and clinicians.

Headquartered in Seattle, with significant operations in the Philadelphia area, Accolade has raised $237 million in known funding since its founding in 2007. Key backers include , and .

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