Are companies staying private longer?

According to research the median age of technology companies going IPO has increased in recent years. In 1980, the median age of an IPO company was 6.5 years, while in 2000 the median age was just 5 years. On average, from 1980 to 2019, the average median age of an IPO company was seven years, but between 2017 and 2019, that average median age rose to 12 years

There may be various reasons as to why companies are staying private longer, including:

  1. Increased funding provided by public markets
  2. Increased investor limit from 500 to 2,000
  3. Costs associated with filing for and conducting an IPO
  4. Desire of founders to retain company control
  5. The ability to execute long-term strategies vs. focus on quarterly earnings
  6. Minimization of disclosure requirements

Is the IPO Landscape changing?

Below is a comparison of relevant characteristics of the IPO landscape over the course of 2000 through 2019.

The rise of "Unicorn" Companies

A unicorn startup or unicorn company is a private company with a valuation over $1 billion. As of July 2020, CB Insights recognized 475 unicorn companies, with a cumulative valuation of ~$1.42 trillion. Of the 475 unicorns, nearly half were located in the U.S. In 2019 alone, 142 companies achieved unicorn status, while in 2018, 158 companies achieved unicorn status. In comparison, in July 2015, there were just 84 U.S. companies that qualified as unicorns.

U.S. tech startups have been able to stay private longer due in part to an influx of private capital. In 2019, the median funding raised by a technology company pre-IPO was $281 million. For comparison, in 2012, the median raised was $64 million. As private investment has increased, so too have pre-IPO valuations. Since 2012, the number of unicorn-valued IPO companies have steadily risen, and in 2019 more unicorn-valued tech companies conducted IPOs than non-unicorn companies.Further, studies conducted by Goldman Sachs indicate that in recent years, companies may have benefited from staying private vs. going public. In its 2019 report, the financial institution found that newly public companies in 2017 and 2018 would have created more value for themselves by remaining private.

In recent years, companies have begun increasingly raising “mega-rounds” of $100+ million, outpacing the number of companies that are choosing to IPO. In 2012, less than 20 rounds of $100+ million were raised by tech companies. In 2019, by comparison, over 140 such rounds were raised, while the number of tech IPO has fluctuated between 20 and 40 per year from 2012 to 2019.

[Source: 369 Growth Partner Research]