Are more companies rejecting the IPO path? In 2014, 62 technology companies went public – while there have been only two technology IPOs this year.
It’s a complete 180 degree change from the IPO hype. How can Uber still be private, even though it’s the perfect candidate with a valuation of $62.5 billion? Why haven’t they gone public yet?
But the bigger question is: Why should these companies go public? Startups as successful as Uber are swimming in a pool of cash so vast that the bigger challenge is in managing what to do with all the funds. Raising funds as a startup has been made even easier thanks to new rules that permit anyone to invest $2,000 or more in small companies for a stake in the business. Companies can raise up to $1 million a year this way – and virtually anyone can be a venture capitalist.
As the co-founder and co-CEO of a company that has been around for over two decades, I’ve seen the rise and fall of the dotcom era, the rise and fall of some of the “unicorns”, and every phase in between. On the flip side, as venture capital funding continues to dry up, startups that had raised so much cash are now struggling to validate their sky-high valuations. As a company that’s experienced three-year revenue growth of 92%, I’ve had many conversations and questions asked about Replicon’s own plans to go public.
Here’s the reality: going public is nothing like the get-rich-quick schemes that people seem to envision it to be. The average age of US technology companies that went public in 1999 was four years, while in 2014 it took 11 years. As the IPO market lays dormant, expect that timeline to drag on for a few years longer. Meanwhile, at the end of 2015, there were 146 private tech company “unicorns”, and 14 “decacorns” – those with valuations of over $10 billion.
Sure, there’s an IPO drought going on right now. And certainly for many startups, it’s been more lucrative to raise capital recently than face the public markets.
For me, it’s not a case of going public versus remaining private. It’s about doing what’s best for the company and thinking of the business’ long-term aspirations. As I’ve always said, slow and steady wins the race. While raising more capital or going public is a huge accomplishment, so is the ability to balance steady growth and innovation.
There are a number of companies rumored to be on the IPO path this year – Blue Coat Systems, Talend, Coupa Software, and Twilio are a few companies – and there are certainly others who have confidentially registered. Acacia Communications, the second tech IPO of the year, performed very well on its first day of listing. And Didi Chuxing, China’s version of Uber, is rumored to be considering an IPO in 2018. These companies are well positioned to break the tech IPO drought for the first half of 2016.
The market always has its ebbs and flows – but expect 2017 to be a banner year for tech IPOs. I can’t wait to see where the market is headed to next.