ltvia’s SVP of Industry Solutions & Strategy, Jeff Williams, authored an article for OpenView Labs titled Why Are We Seeing Fewer Venture Capital-Backed IPOs? In it, Jeff discusses IPO trends and what they mean for firms.
He starts the article by recalling:
“I have what many would consider an oddly-vivid memory of VC-backed IPOs in 2007. Midway through that year, I got my start as an investment analyst at a VC fund-of-funds. Within just months I had seen several portfolio companies go public, and venture investors taking a company public immediately cemented itself in my mind as the manifestation of just how great American capitalism is. Maybe it’s the delusion from all of those years I spent creating Excel masterpieces, but I can’t help—in looking back—feeling that they just don’t make VC-backed IPOs like they used to.”
After framing things up that way, Jeff goes on to share stats on the decline both of publicly-listed companies and venture-backed IPOs:
- The number of publicly-listed companies reached 7,607 in 1997 and has declined nearly every year since, with just 3,618 by the end of 2017
- From 1993-2000, the average number of yearly IPOs was 451. In the period 2000-2016, the average dropped to 108.
Assessing IPO Trends: Are IPOs Extinct or Just Evolved?
In Jeff’s experience, the VC-backed IPO hasn’t gone extinct, it’s simply evolved.
When considering IPO trends, he notes that, “Venture investors and their portfolio companies have found lucrative exits and large capital infusions without the hassle of being a public company by way of the Growth Equity and Buyout funds that have stepped in to acquire venture-backed companies that historically would’ve gone public.”
He goes on to explain that the number of publicly-listed companies of all sizes has declined, but that Micro- and Small-cap companies have been most affected by this change.
As for why this is happening, Jeff points out that conducting an IPO is very expensive. And on top of that, simply being a public company involves maintaining important-but-costly Sarbanes-Oxley compliance.
And, it’s Jeff’s view that, “IPOs still have their place and they haven’t gone away entirely, but they’ve become more appropriate strategic raises for larger, more-established companies.”
The article is an interesting and insightful read on IPO trends. Check out Why Are We Seeing Fewer Venture Capital-Backed IPOs? on the OpenView website.