Want a clue that the current tech market is a bubble? Look at the funding rounds–and not just for the likes of Uber and Airbnb.
Instead, focus on the companies that have yet to reveal, let alone sell, a single product. In the last year we’ve seen seen the three largest funding events ever for such pre-launch tech startups, which led us to do some research for as complete a list as possible of the young startups that have raised the most money before launching. The 11 tech companies we found had raised at least $30 million each, and over $1.2 billion total in pre-launch funding.
Top of the list is Magic Leap, the buzzy virtual reality startup that hardly anyone has seen in person. The company’s website says little other than their slogan: “it’s time to bring magic back into the world.” But behind closed-doors, Magic Leap’s so-called “Digital Lightfield” must have impressed Larry Page and company at Google. The search giant led a $542 million Series B round in Magic Leap last November, with participation from Qualcomm as well as KKR, Vulcan Capital, Kleiner Perkins Caufield & Byers, Andreessen Horowitz, and Obvious Ventures. The round brings Magic Leap’s total funding to date up to $592 million.
There has been plenty of hype for second place on our list: Jet.com, a would-be Amazon challenger. Founded by Marc Lore, who sold his previous ecommerce company to Jeff Bezos, Jet wants to be Costco for the web. Although it only launched in beta for a few thousand insiders last month, Jet had already raised $225 million from investors. That includes an unknown amount from China’s ecommerce king, Alibaba.
The third spot goes to 21 Inc, a stealth Bitcoin startup that took its first $5 million in funding in 2013. Eighteen months later, in May, it announced a further $116 million round–a record in the Bitcoin space. 21 Inc says it plans to sell a line of chips, embedded in smartphones and other Internet-connected devices, that mine for the digital currency. The idea is still more theory than reality.
At numbers four and five, we find our first failures: AdKeeper, which raised $43 million before its launch in January 2011, and Color, which took $41 million (including $25 million from Sequoia Capital) before launching in March of the same year. The former was an attempt to replicate the coupon-clipping mentality of customers flipping through newspapers. AdKeeper let people save the ads they saw online, a feature no one wanted.
Color, a photo-sharing app, was another cautionary tale. Despite turning down a reported $200 million acquisition offer from Google, the app never gained traction while Instagram took off. The startup shut down in 2012 and what remained was acqui-hired by Apple for less than $10 million.
Since taking in $40 million pre-launch, Oscar‘s future looks much brighter than the previous two flame outs. The health insurance startup, founded by VC Josh Kushner in 2013, successfully broke into the new insurance marketplace in New York following Obamacare’s roll out. The company raised an addition $145 million in April at a valuation of $1.5 billion.
The jury’s still out on Airware, which is building a software platform for commercial drones. Airware raised an additional $25 million in a Series B round led by KPCB in July 2014, bringing its total funding to $40 million. At the time, the money was said to be “part of Airwave’s preparation for the commercial launch of its platform” later that year.
After Airwave, we have another two startups that failed miserably. Cuil, a search engine that set its sights on Google, raised $33 million before launching in July 2008. It shuttered two years later. Meanwhile, Airtimedebuted with great fanfare in June 2012, due to its cofounders–former Napster partners Sean Parker and Shawn Fanning–and $33 million in funding. The videochat service, which drew unfortunate comparisons to ChatRoulette, fizzled before relaunching under a different name in 2014.
By contrast, the $32 million in funding Zillow took prior to launching its beta was a brilliant investment. The real estate database website went live in February 2006. It subsequently went public in 2011, and has since grown to a market capitalization of over $5 billion.
Finally, at number 11 on our list, we have the infamous Clinkle, which has been hemorrhaging employees in recent months. Lucas Duplan, Clinkle’s 24-year-old CEO, raised $30 million with ideas of disrupting the financial services industry with mobile payments. Those plans failed as the startup couldn’t get a working prototype and was eventually passed by Venmo, Square, and Apple Pay.
Honorable mention goes out to Affirm, PayPal founder Max Levchin’s online lending startup. Affirm has already raised $320 million in equity and debt financing, and would place second on our list if not for having reportedly made $100 million in loans so far.
For the purposes of this exercise, we limited the list to pure software and hardware tech companies–not biotech. With pharmaceutical giants abandoning drug research, that task has fallen to biotech startups, who by definition need millions of dollars before a drug can come to market. For example, cancer-fighting company Juno Therapeutics has raised $300 million and neurodegenerative disease-focused Denali Therapeutics has raised $217 million. The worlds of tech and biotech are converging, however. Google and drug-maker AbbVie have partnered to commit up to $1.5 billion to Calico, a startup that wants to literally defy aging.