- Of the 1,550 entrepreneurs surveyed by Techstars, only 15% said an IPO was a long-term goal.
- The tech IPO market has collapsed in 2022 due to high inflation and rising interest rates.
- There was some movement when Reddit went public in March, but the market has been largely static since then and shows no signs of recovery this year.
Silicon Valley is known for creating technology companies that start in garages and grow into giant public companies with global reach. From Oracle and Microsoft to Google and Facebook, the public markets have helped turn ambitious tech founders into billionaires.
But an IPO's appeal is fading, according to a survey released this week by startup accelerator Techstars: Just 15% of the 1,550 entrepreneurs Techstars surveyed said an IPO was a long-term goal, down from 16% a year ago.
After a long bull market in high-growth software and internet stocks, the tech IPO market collapsed in 2022 due to surging inflation and rising interest rates, which forced investors to avert risk, causing valuations to plummet and leading many later-stage companies to postpone their plans to go public.
Last year was a record-breaking time for initial public offerings, with companies like Roblox, Robinhood, Rivian and UiPath entering the market. There have been few notable tech IPOs in the past two and a half years.
“Combined with a lack of confidence that IPOs will recover in the near term, this year's data further highlights a trend where startups are staying private for longer and IPOs are not preferred by the majority of early-stage entrepreneurs,” Techstars said in the report.
Thirty-four percent of entrepreneurs surveyed would like to be acquired by a public company, down from 36% last year, while 30% said their goal is to remain private or independent, up from 28% in the last report.
The trading floor of the New York Stock Exchange (NYSE) is gearing up for the initial public offering (IPO) of social media platform Reddit on March 21, 2024 in New York City.
Investment banks are preparing for a recovery.
“The IPO market is back,” Colin Stewart, global head of technology equity capital markets at Morgan Stanley, told CNBC in April, predicting that 10 to 15 tech companies could go public by the end of the year. Stewart cited high-priced, high-volume IPOs as a “void.”[ing] For the future.”
Stewart's comments came after Reddit went public in March, becoming the first major social media company to hold an IPO since Pinterest in 2019. Astera Labs, which sells data-center connectivity chips to cloud and artificial intelligence infrastructure companies, also went public the same week, followed by data management company Rubrik in April.
That followed a brief flurry of activity in September with the debuts of chip design company Arm, grocery delivery company Instacart and cloud software vendor Klaviyo.
But it's been mostly quiet for emerging technology companies on Wall Street compared to the period before 2022. Uncertainty surrounding the presidential election in November is expected to lead to a dearth of deals for the rest of the year.
“We have elections coming up, which is not going to be good for the market in the second half of the year,” Athena Theodorou, head of European software banking at UBS, told CNBC's “Squawk Box” on Wednesday. “We expect the market to remain weak in the second half of the year,” Theodorou said, but noted that the IPO market is starting to show signs of life in Europe.
clock: European IPO market revives
