Tech IPO Market Heats Up

Five months into 2018 sixteen technology companies have gone public compared to nine during the same time period last year. Five consumer companies and eleven enterprise companies have popped on average 32% since their IPO pricing. Four companies, Huami, Bilibili, One Stop Systems, and iQIYI have traded down from their IPO pricing. The other twelve demonstrate public investor interest in new offerings.

B2B and B2C companies’ enterprise value both equal about ~$50B. While Spotify directly listed on the NYSE, it accounts for $29.6B of the $50.3B, or 59% of the consumer enterprise value. The bar chart demonstrates that fewer consumer companies reach scale but can achieve outsized exits compared to B2B companies.

The majority of the businesses are growing very quickly. Chinese fintech company Senmiao grew revenues over 4x annually. B2B companies spanned 16%-129% annual growth.

The average company generated -37% net income margin, though Huami, One Stop Systems, PagSeuro, and nLight were profitable at 8%, 0%, 28%, 1% net income margin, respectively. Post-IPO stock movements suggest that the market still prefers growth to profits.

Interestingly, about one-third of the technology companies that IPOed are foreign. Overall, U.S.-based companies achieved larger gains post-listing than businesses headquartered internationally.

The pie chart demonstrates that SaaS businesses represent three-quarters of the enterprise IPOs. Dropbox achieved the highest enterprise value in the enterprise category at $12.8B. We continue to see a shift from hardware to software-first businesses.

The 2018 IPO market appears healthy and looks to outpace last year. Upcoming IPOs include endpoint security company Carbon Black, which we analyzed here.

Full disclosure: Redpoint Ventures is an investor in Zuora, which went public on April 12, 2018.