Tech startups and High-growth companies are getting back into the IPO game — despite mixed results in 2023 and a historic drought in IPOs. Among the main contenders in the coming months is healthcare payments company Waystar, with media reports pointing to a cybersecurity startup. rubric Micromobility company Lime is also considering IPOs. As AI startups continue to make noise in venture rounds, it would not be surprising to see many companies go public in the future.
However, given bankers and investors’ continued focus on clear paths to profitability and positive cash flows, venture-backed companies looking to tap public markets must focus on their business fundamentals and execution while clearly understanding the path to future growth.
Below, we’ll discuss why some of today’s tech startups are moving forward with IPO plans and how to build the foundation for long-term success.
Why go public now?
Get the right elements for growth before an IPO, and your startup can make steady progress as a public company.
It’s an expensive time to be a venture-backed technology company, as if you don’t grow, you die. Budgets are under pressure due to rising borrowing and talent costs. With valuations significantly lower than they were a year and a half to two years ago, few high-growth companies want to risk raising a “down round” if they can go into cash conservation mode instead — either so they can tap the public markets Or until valuations come back so they can raise another venture round as a bridge to an IPO. However, many of them have already made cuts or layoffs, and the worry is whether they have enough runway to wait it out.
After 2021, startups looking to IPO — typically late-stage, venture-backed companies that need significant funding to continue growth — may have turned to private equity or debt financing rather than going public. But in the current economic climate, these fundraising sources are often less available or may be less attractive. For example, venture capital funding has slowed and is increasingly directed toward early-stage startups, while high interest rates make raising capital through debt financing prohibitively expensive.
Internal forces are also driving interest in the IPO though Mixed reception For notable recent listings like Instacart and Klaviyo. Some investors in early-stage startups are looking for exits. Meanwhile, employees who may have been with a company since its early days want to review their stock options. Of course, such factors always play a role in fast-growing technology projects. But companies that may have put their IPO plans on hold during the market downturn in 2022 can’t hold out forever.