Now past the halfway mark of the third quarter, we are quickly chewing through 2023. Soon it will be Disrupt season, and then we’ll head straight into the fourth quarter. For tech companies, that means the window to file for an IPO this year is beginning to close.
Happily, some companies are expected to actually go public before 2023 ends.
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Instacart, the heavily venture-backed grocery delivery and software company, is expected by some to file for its IPO as early as this week, aiming for an early-September debut. Databricks remains an IPO candidate, though it is unlikely to go “first” among former startups looking to list. The ARM transaction is also coming, putting another big-name company on the list.
The flurry of news — and, likely, progress in IPO prep and planning at some of tech’s biggest private names — comes in the middle of a slightly bad time for tech shares. Still, tech stocks have regained around half of their losses since the last tech boom faded. A week of selling can’t dent real progress by tech companies on the public markets, even if this market could trim revenue multiples for upcoming IPOs.
To get here, we needed a lot of time, the SPAC bubble had to fade, revenue multiples had to reinflate, and two companies with good IPO pricing and early trading runs had to generate a lot of publicity with their own listings. If you’re hoping that your employer will finally get out the door in the next few quarters, then swing by a Cava location wearing Oddity cosmetics, because those two companies did you and your illiquid holdings a real solid by listing well earlier this year.
Technology and finance media have recently had a lot to say on the IPO matter. The Information broke news regarding Instacart’s and Databricks’ growth rates, helping frame their impending listings with real numbers. The Financial Times has news about each of the core IPO candidates we’ve discussed ad nauseam. Bloomberg has notes as well. And Yahoo Finance reported that as the tech IPO market gets off its backside, it could have a massively busy 2024.
I do not want to get my hopes up, but it seems unlikely that I can avoid a little optimism. After all:
- Many late-stage startups need to go public quickly.
- There is no signal of an M&A wave that could lower the pressure on unicorns.
So, IPOs.
The only question we’ll have is how the early debuts will perform. Notably, we have three pretty different companies that will have varying levels of impact on late-stage startups:
- Instacart is a consumer delivery business. It rode high during the pandemic and has spent the years since expanding its product lines. It is now a B2B software company and ad platform to boot. If it IPOs first, it will not show the market how pure-play software companies are valued today, but it could provide a solid boost to the market sentiment around IPOs if it does well.
- Databricks is an enterprise software company in the data and AI markets. It’s known well enough to make a splash with its IPO, but the question is simply how it will price. Quick revenue growth at scale and narrowing losses should help there, but we won’t know for sure until we get our hands on the S-1. Frankly, I think Databricks should go public simply so that we, the tech press, can stop asking its CEO when the IPO will happen. I think I can ask Ali Ghodsi that question maybe once or twice more before even I get bored of doing it. A strong Databricks IPO could hopefully unlock a sheaf of enterprise software listings.
- And then there is Arm. This one is tricky. On one hand, an early Arm listing would be massive in dollar terms and a potential win for SoftBank. The Japanese conglomerate and investing powerhouse could keep up its recent investing momentum. And if Arm’s IPO doesn’t go well, I cannot see how a hardware offering could harm software IPOs too much. A flop would not be good, though, and since we are still trying to push-start the tech IPO market, we can’t afford any misfirings.
After going on about technology IPOs and the ongoing drought for so long, I would like a change in theme, one driven by SEC filings, data and a complete lack of need to prognosticate the future. I thank everything that our wait is coming to an end.