Silicon Valley is renowned for producing technology companies that start in garages and grow into globally recognized large-scale public corporations. From Oracle and Microsoft to Google and Facebook, the public market is responsible for transforming ambitious tech founders into billionaires. However, a survey released this week by startup accelerator Techstars reveals that the allure of IPOs is diminishing. Among the 1,550 entrepreneurs surveyed by Techstars, only 15% stated that their long-term goal is an IPO. This represents a decrease from 16% during the same period last year. Following the collapse of the tech IPO market in 2022 due to soaring inflation and rising interest rates, which forced investors to shed risk, significantly lower valuations, and led many late-stage companies to postpone their plans to go public, the IPO market for technology companies has seen few notable offerings over the past two and a half years. Techstars stated in its report, “Combined with a lack of confidence in a short-term rebound for IPOs, this year’s data further highlights the trend of startups staying private for longer, with IPOs no longer being favored by the vast majority of early-stage entrepreneurs.” 34% of the entrepreneurs surveyed lean towards being acquired by a public company, down from 36% last year, while 30% stated that their goal is to remain private or independent, up from 28% in the previous report.
The New York Stock Exchange (NYSE) trading floor prepares for the initial public offering (IPO) of social media platform Reddit in New York City on March 21, 2024. Investment banks have been preparing for a rebound. Colin Stewart, Global Head of Technology Stock Capital Markets at Morgan Stanley, stated in April on CNBC that “the IPO market is back,” and expects that by the end of this year, there may be 10 to 15 technology companies going public. Stewart said that high-priced and well-traded IPOs “are setting up for the future.” Prior to Stewart’s remarks, Reddit went public in March, becoming the first large-scale social media company to hold an IPO since Pinterest in 2019. Astera Labs, a company selling data center connectivity chips to cloud and artificial intelligence infrastructure companies, went public in the same week, and data management company Rubrik went public in April. Prior to this, there was a brief surge in activity with the debuts of chip designer Arm, grocery delivery company Instacart, and cloud software provider Klaviyo. However, compared to before 2022, Wall Street’s new tech companies have mostly remained silent. The uncertainty surrounding the November presidential election suggests a lack of activity for the remainder of the year. Athena Theodorou, Head of Software Banking in Europe at UBS, stated on CNBC’s “Squawk Box” on Wednesday, “We have an election coming up, which is not helpful for the market in the second half.” Theodorou said, “We do expect the market to stay subdued in the second half.” However, she noted that in Europe, the IPO market is showing signs of recovery. Observation: European IPO market is recovering
