IPOs can wait.
Driven by a mix of hedge funds, mutual funds, corporates, sovereign wealth and private equity investors, funding to private tech companies is flowing freely. But IPO fundraising is relatively non-existent in the US this year.
According to CB Insights data, just two U.S.-based VC-backed tech companies have gone public in 2015, Box and Maxpoint Interactive, raising a combined $250M in their public offerings. In contrast, total funding to U.S. VC-backed tech companies this year has already hit $9.8B (with a B) behind nine-figure rounds to a spate of companies such as Lyft, Snapchat, Pinterest, Jet.com and SimpliVity. Today, there are seven U.S. VC-backed tech companies valued at $10B or more. There are, of course, some tech companies waiting in the wings to go public such as Etsy which looks like it may rank atop NY’s biggest tech exits, but to-date, VC-backed tech companies are choosing to raise more from private market investors then test the public waters. Of course, it remains to be seen if private market valuations will be sustained by public market investors. Some valuations, like Dropbox’s, do look difficult to justify vs public market comparables.
The chart below highlights the gargantuan public-private tech fundraising discrepancy in 2015 given the basic absence of U.S. VC-backed tech IPOs in the first 2.5 months of the year.
The gap has widened since 2014. Last year saw 34 U.S. VC-backed tech companies including Lending Club, GrubHub and GoPro raise $5.04B in their IPOs while private VC-backed tech companies took $39.03B in total funding.
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