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Tech IPOs Return to the Spotlight After 20-Month Hiatus

Silicon Valley has been buzzing with anticipation for the next big tech Initial Public Offering (IPO), with a noticeable void spanning 20 months since the last significant venture-backed tech listing. Last Friday, that wait was over as grocery delivery company, Instacart, and data and marketing firm, Klaviyo, signaled their intent to debut on the stock market.


Earlier, Arm, the chip designer under the SoftBank umbrella of Japan, announced its intention to list on the Nasdaq. It comes seven years after its $32 billion acquisition and privatization.

Despite having varied business models, these three companies will gauge the public market investors' appetite for fresh tech opportunities. Their market performances may pave the way for more companies to list in the upcoming quarter.


Lise Buyer, founder of IPO consultancy Class V Group, stated, “There's potential for these IPOs to inspire others to take the plunge. Businesses shouldn't be waiting for the historic valuations of 2020 and 2021 but should make their moves.”


Referencing past tech valuations, Buyer noted that while companies like Snowflake saw valuations skyrocket in 2020, they've since become more moderate. For instance, DoorDash experienced a stock price drop of over two-thirds from its 2021 peak, even with a 60% revenue growth.


Instacart, backed by heavyweights like Sequoia and Andreessen Horowitz, adjusted its valuation from $39 billion in early 2021 to a later value of $24 billion, reflecting the changing tech landscape in the post-pandemic era. Comparatively, DoorDash’s valuation suggests Instacart could be valued near $11 billion.


However, Instacart has recently reported positive growth, with a 15% revenue rise in the recent quarter, maintaining profitability through cost-cutting and streamlining operations.

Klaviyo, on the other hand, has remained stable in its valuation since its $9.5 billion estimation in 2021. The company, which offers data-driven marketing solutions, has seen a 50% revenue surge in the last quarter.


Using the Bessemer Cloud Index as a benchmark, Klaviyo's growth could position its valuation around $7 billion. Among its main investors are Summit Partners, Shopify, and venture firm Accel.


Lise Buyer highlighted the strategic timing of these filings, suggesting that post-Labor Day listings are typical, aligning with the post-summer renewed market interest.


Meanwhile, Arm, owned by SoftBank’s Masayoshi Son, is in a league of its own, seeking financial relief from some previous ill-timed investments. Historically public, UK-based, and larger than most venture-backed entities, Arm's technology powers a majority of global smartphones. To achieve its $32 billion valuation, its earnings multiple would need to be approximately 61 times.


Amidst these developments, there's an underlying sentiment of cautiousness. The Nasdaq, although up by 30% this year, has shown signs of slowing down. Lise Buyer suggests that, despite market oscillations, companies must establish their value in the public domain, emphasizing the ultimate market will determine their worth.

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