Initial thoughts
Unity Software Inc. (NYSE:U) is certainly an intriguing proposition, since its platform is used in over 50% of the mobile, console and PC games, and 94 of the top 100 game development companies count as its customers, making Unity an evident market leader. Unity is not confined to just gaming, and including commercials and animated films, the company estimates total addressable market potential of $29B. However, this estimate is conservative compared to reports that the overall gaming market is as large as $185b in 2020. Unity's business position is strong considering the vertical integration of its system, from creating solutions (e.g. editors) and operating solutions (e.g. end-user engagement and cloud operations).
What I found most interesting about Unity's IPO is its selection of initial investors by management, rather than by investment bankers, due to Unity's preference for long-term investors through a data-driven selection process. There has not been many details or major newswires reporting the same (which is understandable as it would upset the investment banking community and their long held business models), but if accurate, Unity Software certainly has a visionary and out-of-the-box thinker as its leader. This method of IPO bypasses several agency problems associated with contracting an investment bank as agent for the job. To put it simply, think of the time when you did not quite get what you bargained for, having gone through an agent for any product, be it a car, or a house. The resource inefficiency implications and ethical discussion goes beyond the scope of this article, but the relevant point is Unity's leadership deserves some applause for providing a more level playing field for both initial and future investors.
Valuation: Not Crazy
With many tech IPO valuations in the clouds, it is an interesting attempt to get a feel of how
