MENLO PARK, CA--(Marketwired - Feb 6, 2017) - Battery Ventures, the global investment firm, launched a new index to track the stock performance of consumer marketplace companies and social networks, including large global brands like Facebook, Alibaba, Yelp, eBay and OpenTable.
The Battery Ventures Network Effect Index -- which includes 32 current, publicly traded companies and four former public companies that were acquired in the last several years -- highlights companies that exhibit profound "network effects," meaning the services become more valuable the more people use them. All of the companies were worth at least $1 billion as of Dec. 31, or at the time of their acquisition.
Research conducted by Battery General Partner Roger Lee and his team found that the stocks of the companies in the index have together risen by 161% in the last five years, as of Dec. 31, and also outperformed the S&P 500 Index by 84% in that same period. That means if an investor had put $1,000 into this basket of "network effect" stocks in 2011, he or she would have about $2,606 today.
The "network effect" is also a key feature of some prominent, still-private Internet companies poised for possible public offerings, such as Snap, Uber and Airbnb, Lee said. Snap officially filed documents to go public last week.
"Many investors and entrepreneurs may be underestimating the power of network effects, particularly among social networks," said Lee, a longtime consumer Internet and business-software investor. "These types of companies can often create strong barriers to competition, which helps lead to explosive growth."
Battery identified social networks as well as two other main types of network-effect companies in its index: advertising-driven marketplaces, such as Zillow, Yelp and Trulia; and transactional marketplaces, including companies such as Alibaba, OpenTable and Etsy.
The combined value of all the companies in the index is $1.08 trillion, and the average time from founding to IPO was 8.0 years, compared to a broader average of 11 years for venture-backed companies. More information on the index can be found here; data will be updated monthly.
See attached image for a full list of the companies in the index.
About Battery Ventures
Battery strives to invest in cutting-edge, category-defining businesses in markets including software, infrastructure, digital media and industrial technologies. Founded in 1983, the firm backs companies at stages ranging from seed to buyout and invests globally from offices in Boston, the San Francisco Bay Area and Israel. Follow the firm on Twitter @BatteryVentures, visit our website at www.battery.com and find a full list of Battery's portfolio companies here.