Was Veeva a better VC deal than Twitter? Emergence Capital stands to generate 266x on its investment in Veeva

Was Veeva a better VC deal than Twitter?

By Dan Primack October 17, 2013: 4:42 PM ET

Emergence Capital stands to generate 266x on its investment in Veeva.

FORTUNE — Yesterday I wrote about how Twitter’s earliest investors would more than double their entire funds on that one deal, assuming that the company goes public at a valuation similar to where it’s been trading on the private markets. But a company with much less sex appeal may actually have been the better venture capital investment. That would be Veeva Systems (VEEV), a provider of cloud-based CRM and content management solutions for the life sciences industry. It went public yesterday at $20 per share, and has since doubled to close trading today at $41.60 per share.Veeva’s only venture capital investors was Emergence Capital Partners, which invested a total of $6.5 million for more than a 31% ownership stake (including a $4 million Series B round in 2008 and a subsequent secondary purchase).

Emergence brought back around $10 million by selling 500,000 shares in the IPO, but held onto another 34.5 million shares that today are valued at around $1.44 billion. Once you do the basic math, that works out to around a 266x return on investment. It also would return Emergence’s second fund more than 7x over — pretty impressive, particularly given that the fund also included an early investment in Yammer, which was acquired by Microsoft (MSFT) for $1.2 billion.

More importantly, that may be a better return than what Twitter’s early backers will generate.

Using the $31 per share baseline, for example, Union Square Ventures’ current stake would be worth $863 million. But it also sold shares in a pair of secondary transactions (alongside Spark Capital), which likely generated a few hundred more million dollars (Twitter, for some reason, doesn’t disclose these sales in its IPO documents). So let’s be real generous and put the total value at $1.2 billion. Or, put another way, less than Emergence’s stake in Veeva. Moreover, USV — not to mention Spark Capital and Benchmark — invested more than $6.5 million in Twitter.

To be clear, both deals are going to be massive winners for their investors — and arguing one is better than the other is a lot like favoring a 160-meter mega yacht over a 155-meter mega yacht. Moreover, all of this is paper value until the VCs actually distribute shares (and that is amplified in Twitter’s case, since we don’t even have a public price yet).

But it felt worth noting that the deal that’s getting all of the attention may not actually be the best one out there.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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