Axevil Capital Successful Exit: Confluent IPO Case
On June 24, 2021, I was celebrating my 31st birthday in a small American restaurant. Suddenly, I received an SMS: one of our portfolio companies, Confluent, had gone public!
I couldn’t hold back my tears. It was the best birthday present ever. We invested in the Confluent startup in April 2021, and after the IPO and a 6-month lock-up period, we sold the shares, earning an annualized return of 256% for our investors!
This deal was a milestone for our venture platform, Axevil Capital. In this article, I’d like to unveil the "behind the scenes" of venture investments by explaining how to invest in startup projects and which startups to choose, using our Confluent deal as an example.
Why Confluent?
First, a few words about the company itself. Confluent is a tech startup that creates infrastructure software for managing big data. The company is behind the development of popular open-source projects (Kafka and Flink) that modernize data architecture for businesses across various industries.
Confluent acts like a central nervous system: companies connect all their services to a continuous data stream and make the most efficient decisions.
Confluent’s platform allows companies to manage all their data "from a single window."
Here are some use cases for the Confluent platform:
Confluent’s Performance: An Undisputed Market Leader
Our analytics team deeply studied Confluent's product and financial performance. Here are the company’s results for 2020, at the time of our investment:
Moving to the present, Confluent continues to grow rapidly, capturing a $60 billion market:
This approach guided our subsequent investments at Axevil. We analyze dozens of companies, looking for three main markers present in Confluent:
How We Purchased Shares in the Private Market
Confluent became the third company in our portfolio, after Klarna and Tanium. We invested jointly with our strategic partner FinSight VC, through whom we met Confluent’s top manager. He was ready to sell part of his stake. We agreed on the price, volume, and deal structure.
In parallel, we pitched Confluent to our investors through Axevil Capital. At that time, we didn’t have an app yet — our team handled everything manually: signing documents with investors, pooling funds.
In that deal, 25 investors participated, collectively investing $3 million. Our partner FinSight VC invested another $3 million.
We then transferred the funds to Confluent’s top manager, received the shares, and completed the entire process within a month — from the start of negotiations to payment and share acquisition (April-May 2021).
The company planned to go public the same year, but we expected a fall listing. Summer is typically a quiet market period, so the IPO news came as a mild shock. Confluent operated in stealth mode, with no leaks about the listing.
Confluent’s IPO — The Moment of Truth!
On June 1, Confluent filed for IPO, ahead of our forecasts, showing excellent results in revenue growth and client base.
On June 24, my birthday, Confluent conducted a super successful IPO on the Nasdaq, with a 25% surge on the first day!
领英推荐
We waited until the market opened in the evening, fingers crossed. The IPO was successful, with heavy oversubscription — the company raised the price range several times. We exhaled and congratulated all our investors.
End of the Lock-Up Period and Axevil’s First Exit
Confluent’s stock opened up 25% and continued to grow significantly during the lock-up period (6 months post-purchase when we couldn’t sell the shares).
In November 2021, the lock-up period ended, and we received physical shares in our brokerage account.
While in the US, we placed a sell order for the entire share package, at almost the highest price in that cycle — around $80 per share. Thus, we locked in a 256% annualized return for Axevil Capital investors in just 6 months!
After selling the shares, we received the funds and distributed the profits among our investors within a week.
What Happened After Confluent
It was a short and very successful deal timing-wise, because right after the sale, there was a market revaluation. All software companies began to fall, despite significant growth in revenue and other metrics. Confluent’s capitalization never returned to its former levels.
For us, this was a landmark deal because, after it, many reinvested their profits, invited friends, and actively recommended Axevil.
However, as in restaurants where location largely determines success, in finance, much depends on the market cycle. We expected Confluent to be the first swallow, followed by our other portfolio companies: Klarna, Tanium, Automation Anywhere...
Instead, a "black swan" event occurred in 2022. A prolonged market downturn began, key rates rose. Investors stopped funding breakthrough startups. Startups, in turn, had to tighten their belts, postpone IPOs, and lay off employees.
Preparing for the New IPO Season
It’s hard to describe the pain of these years. For several years, Axevil has been walking against the wind, hoping for a new IPO season.
But we didn’t sit idle and prepared for the cycle turnaround.
We approached it fully armed:
Markets are inherently cyclical, and declines (like growth) cannot last forever. Since autumn 2023, there have been signals of an imminent cycle reversal:
This is an excellent arbitrage opportunity for investors, which may disappear in a few months. Now it’s still possible to buy breakthrough companies at old “crisis” multipliers in the private market and profit from their revaluation after the IPO.
The most anticipated and closest companies in our portfolio are Klarna, Rappi, Toss, Stripe, Databricks. All of them have either announced a listing or are actively preparing for it.
Sign up in Axevil app to learn about our current deals and participate in the upcoming IPO season!