Based on CB Insights data, in 2014, there have been nearly 3 times as many startups garnering new $1B+ valuations in private financings as there have been VC-backed billion-dollar tech IPOs.
The data shows that 20 U.S.-based VC-backed tech companies have raised a first financing at $1B+ valuation or higher in 2014 YTD compared to just seven VC-backed IPOs that achieved a ‘unicorn’ valuation in the public markets at first day close. Among the new entrants to the billion dollar financing club in Q3’14 were Utah based survey software firm Qualtrics, consumer fin tech startup Credit Karma and mobile gaming startup Kabam.
With investment dollars flowing freely in the private markets, companies are clearly finding it easier to raise there versus the IPO markets. Since the founders and senior management of these startups are often able to take money off-the-table in these mega financings, an exit event is no longer necessary to get liquid and cash out in the startup game.
It will be interesting to see if Alibaba’s successful (and record-breaking) public offering will open up the IPO markets a bit more for tech companies or if companies will continue to raise large rounds in the private markets and be free of the oversight and overhead that are associated with going public.
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