Despite winners like Facebook and ServiceNow, US VC-backed tech IPOs from the past three years are significantly underperforming the S&P.

The rise of mega-rounds or “private IPOs,” i.e. startups raising hundreds of millions of dollars at high valuations while still private, has led to speculation that all the returns will have been squeezed out of these companies before they go public.

That prompted us to look at how tech IPOs have performed in recent years. The answer is … not good.

We looked at all US VC-backed tech IPOs since Facebook‘s May 2012 public offering through October 2015 and found that the return was a lowly 7.05% over that time period (assuming you invested in all these companies on the first day of trading’s closing price, and invested the same amount in each stock).

For context, the S&P 500 return was 60.5% over that same time period, while the Dow Jones Industrial Average returned 42.8%.

An equal weight S&P 500 ETF (RSP), which is a better equivalent for our theoretical tech IPO investments, since it assumes an equal investment into each S&P 500 component, is up even more over the same time period: 67%.

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More simply, your total return would be over 8x times higher if you invested in the S&P 500 instead of putting the same amount of money into every single VC-backed tech IPO since May 18, 2012 (the day Facebook went public). Just over half of the IPOs included in this analysis happened since 2014.

vc backed ipo performance tech

This number is more notable when looking at some of the winners buoying returns for tech IPOs such as Ambarella (up over 700% since IPO), ServiceNow (232%), and Facebook (167%), among others.

Some of the worst performers have been Rocket Fuel (down 92% since IPO), Castlight Health (-87%), and Uni-Pixel (-84%).

Note: For companies that were acquired post-IPO, we have used the acquisition stock price.

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  • Regis Remi Gagnon

    Not hard to believe, considering the profit performance of many of these IPO’s, the astonishing failure rate and the tendency of the VC’s to jump on anything that looks ‘cute’ or ‘trendy; much less useful. If it involves real utility or looks boring, they’ll tell you “It’s not a fit”, but if it involves Food Delivery, Valet Parking, Pet Advice or Sports Fan, then they’ll throw millions at it. There are a lot of Americans who still get grease and dirt under their fingernails and they aren’t looking for concierge service in Monaco.

  • Gary Rikard

    What percentage of IPOs don’t have VC funds? IPOs in general do not perform well for the 12 months post IPO except for the founders / pre-IPO distribution. Agree – too much hype valuation during VC rounds leading to over valuation. Perhaps look at returns from IPO offer or first 2 hours of trading versus closing price.