Mani MasoodIf you are thinking about starting your own business, consider actively following some of the industry leaders. It is always a good idea to study successful companies, strategies, and businesses. Even if they are not directly related to your industry. Having said that, it is extremely important how you apply that knowledge. Trying to apply a strategy that is not suitable for your business and its environment can have serious consequences for your business, organization or project. For one you can end up wasting money on strategies that were not suitable for your.
We are creating new technology at breakneck speeds, and as an entrepreneur, business owner or industry professional it is very important to study them and draw business lessons from them.
Few days ago MarketWatch.com covered a news story titled Here are the big-name startups preparing for 2019 IPOs.
Highly valued tech companies have taken a beating at the end of 2018, but a group of high-profile private companies are about to give Wall Street a new valuation test in 2019.
The coming year is expected to be shaped by “decacorn” IPOs a term commonly used for privately held companies with estimated valuation of $10 Billion or more.
Continued uncertainty around the fate of the bull market combined with a desire for liquidity among longtime investors and employees prompt private companies valued at more than $10 billion to test the public waters. According to The Wall Street Journal, nine U.S.-based startups have been valued at more than $10 billion by private investors — and at least five are expected to go public in 2019, mostly in the first half of the year.
Such a rush of major offerings would follow a big 2018, during which 38 companies valued at $1 billion or more went public, according to the Journal, citing data from Dealogic. That marks the highest level of unicorn IPOs since 2000.
“There’s so much momentum heading into 2019,” said Barrett Daniels, a partner with Deloitte & Touche who focuses on technology IPOs. “A bunch of big companies where the windows might not be as relevant have their sights set on next year, and I feel pretty confident that at least the first half of next year is going to be pretty great.”
The list includes
- Uber
- Lyft
- Airbnb
- Palantir
- Pintrest, and possibly
- SpaceX
Both Lyft Inc. and rival Uber Technologies Inc. have filed confidential IPO paperwork, putting them on track for potential offerings in the beginning of next year if they choose to continue the process. Other big names, including Airbnb, Palantir, and Pinterest could hit the public markets as well, along with a host of companies with large valuations that don’t crack the $10 billion level, such as Slack Technologies Inc.
The list is likely to grow. Companies that were thinking about going public in 2020 might decide to push up their plans to the early part of next year, according to Daniels, given some skepticism about whether the market will hold up in the next two or three years. While he deems volatility “the enemy of IPOs,” he expects that the largest private companies will be able to plow through “choppiness that could make the typical unicorn uncomfortable.”
Current broad market activity suggests that, in terms of overall IPO volume, 2019 likely won’t be on par with 2018. There have been 214 IPOs so far this year, according to data from PricewaterhouseCooper, up from 176 in 2017 but down from 268 in 2014, the recent peak.
The companies going public today tend to be older than those that held IPOs in the dot-com bubble, meaning they have more mature business models and raise more money. “Companies that have shown a pathway to profitability in light of slowing growth have been very well-received by institutional investors,” even if they’re still in the red at the time of their offerings, said Rohit Kulkarni, the head of research at pre-IPO marketplace SharesPost.
Though the businesses going public in the next year might be generally larger and older than those that have had IPOs in the past few years, expect them to follow a similar playbook, including when it comes to dual-class share structures that limit voting power for individual investors.
“There’s been some pushback from the institutional-investor community and public investors, but I don’t see it changing anytime soon, and I don’t see issuers deciding not to do dual-class if that was their natural inclination,” said Brad Weber, a Goodwin partner who leads IPOs on behalf of tech issuers and investment banks.
Regardless of whether you plan to invest in these companies, the IPO process presents an opportunity to learn more about major brands that have thus far provided limited information about their financials. “These are companies generating billions in revenue, so it will be interesting to see what’s under the hood,” said Adam Augusiak-Boro, a senior associate at EquityZen, an online marketplace for pre-IPO shares.
There’s no doubt that developing and implementing the right strategy for your own business is a challenging proposition. Selecting the time to take it for IPO or even seek funding at an earlier stage is one of the most critical strategy decisions that any company may face. But with the right approach, you can overcome the challenges, and then boldly move forward on your new strategy.
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