Venture

When the dam breaks, IPOs are going to be wild

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Image Credits: Nigel Sussman (opens in a new window)

No one expects every startup worth $1 billion to be ready to go public, but the collection of billion-dollar startups that are ready to list is larger than you might think. So much so that when the IPO window finally does reopen, we could be faced with a veritable torrent of public technology companies.


A programming note: I am off this week. The excellent Anna Heim, who often helps write The Exchange and recently took over its weekend newsletter, will be filling in. She’s the best! I’m back on the 22nd!


As the saying goes, don’t threaten me with a good time. But TechCrunch’s general hunger for new S-1 filings and the data that they include is not what we need to talk about today. Nope, we need to discuss pace.

When the levee breaks

The pace at which startups are reaching unicorn status is slowing dramatically. From a peak of 148 new unicorns born in Q2 2021 to 85 in Q2 2022, per CB Insights, investors are reining in how fast they mint new billion-dollar startups.

This isn’t a surprise. After all, the stock market has negatively repriced technology stocks, and venture investment has also slowed. Seeing fewer startups reach the traditional upper-valuation threshold is not a shock in light of those facts.

But 85 in the second quarter is still nearly one per day, and this was a period where exit volumes were downright dismal.

That said, the unicorn traffic jam is getting longer, increasing pressure in the private markets to liquify its paper wealth, which only a huge run of IPOs has the chance to alleviate. Even greatly accelerated M&A activity will not clear the backlog of private unicorns, as there are too many, the group is too large, and, at their prices, deals will take too long to make a dent in the pileup of unicorn wealth.

The good news is that, as we wrote on Friday, the best unicorns are in fine shape to go public next year provided their growth rates hold up and tech valuations don’t walk another leg down.

Per a Bessemer dataset, there are at least 150 private unicorns that have annualized revenues of $100 million. That means that at least 150 of the more than 1,000 unicorns are IPO candidates right now. Throw in another few quarters of growth, and by 2023, the list of possible IPOs is going to be long.

Back in 2021, Crunchbase News counted 59 IPOs and direct listings by venture-backed companies. That year was killer for IPOs. It may be Monday, but I am sure that all of us who have had our first coffee can see that 59 is smaller than 150. By that, I mean that the number of venture-backed IPOs last year, when things were hot and wild, was small compared to the number of unicorns that are ready to go public now.

This means that when the IPO window opens, it’s going to be downright diluvian.

And even that could be conservative. What if:

  • Tech valuations recover by 25%, making even more unicorns reasonably priced by then-current standards? The list of IPO possibilities could stretch even further.
  • Tech valuations recover by 50%? At that point, I would expect to see an S-1 per business day for some time.

But the world could fall apart, making our above view too rosy. China might invade and try to conquer Taiwan. The Russian invasion of Ukraine could metastasize. Inflation might prove harder to tame than expected, resulting in even more draconian central-banking policies. American democracy could fall at the hands of an increasingly militant religio-fascist movement. That sort of thing.

But if no new global shocks hit, we could be in good stead for the coming IPO cycle to set records. If tech valuations can recover even a glimmer of their former luster, we could be staring at the public and private market equivalent of an exploding gold mine.

Bring it on. I miss IPOs. And I miss the fun of watching companies shed their overly extended youth for real corporate maturity. Let’s go!

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