Going Public Loses Luster for Tech Start-Ups

With all the hubbub surrounding young technology companies such as Snapchat and Pinterest, you might expect initial public offerings to erupt left and right in the sector. But that isn’t the case.

The dollar value of tech IPOs has plunged 88 percent through September 18 this year, to $4.49 billion, compared with $37.37 billion during same period of 2014, according to financial data provider Dealogic. Technology shares have been hit hard in the recent stock market correction, with the tech-heavy Nasdaq composite index dropping 9 percent since August 17.

几个因素解释了下降。首先，年轻科技公司可提供大量风险投资，因此他们不需要IPO获得融资。和投资者，公司的创始人和员工不再需要IPO兑现其一些公司股票（可在二级市场上销售，以便在经济资金资金的后续风险资金和整个公司销售到更大的竞争对手）。此外，许多最近的技术IPOS表现不佳。和IPO给公司带来麻烦，例如季度收入报告和处理activist investors.

As for the availability of capital, theFederal Reserve’s low-interest-rate policy推动投资者采取gr吗eater risk. Some of those investors are flocking to venture capital. Even mutual fund managers such as Fidelity Investments and T. Rowe Price have jumped in the funding pool. “There is a lot of money floating around chasing returns,” says Simon Olson, a former Google executive who recently founded Galactic, a São Paulo–based wealth management firm. “Uber and Airbnb have been able to raise billions of dollars at high valuations.” In the past, not so much money was available for tech companies’ later-stage funding rounds.

In addition, it has traditionally been cheaper for companies to obtain capital through an IPO than via late-stage venture capital. But now VC firms are happy to invest on terms favorable to the companies, says Rick Summer, an Internet and technology equity analyst at Morningstar in Chicago.

There’s also an image issue at work for venture capital firms, says Vassil Mladjov, a research director at tech analysis firm Gartner in Santa Clara, California. “It’s sexy for VCs to say, ‘We have many unicorns, rather than IPOs,’” he says. Unicorns are privately held tech companies with a valuation of at least $1 billion that are now all the rage for the tech set. “VCs are willing to pay a premium to get a unicorn in their portfolio to look relevant,” Mladjov says. “That’s the new standard.”

When it comes to strategic sales to bigger players, “getting big fast is more important that it once was,” says Jay Ritter, a finance professor at the University of Florida. “For a company with a hot technology, growing organically takes too long. Greater value can be realized if the company sells itself in a trade sale.” Big tech stalwarts such as Microsoft Corp., Oracle and Cisco Systems are more than happy to snap up small companies with promise.

Not all the IPOs that have taken place worked out well for investors, mind you. Shares of Twitter, which went public in November 2013, havedropped 38 percent from their first-day close. Cloud content company Box, which issued shares in January, has slumped 45 percent. “Start-ups that could go IPO saw that these companies didn’t deliver. That made people think twice,” Mladjov says.

然后有一个公共公司的监管要求。多年来，企业家一直在抱怨2002年的萨班斯 - 奥克斯利法案，该法案创造了更严格的报告规则。他们也不渴望专注于季度利润，并可能不得不处理活动家投资者。“有与公众有关的成本，”Olson说。“一旦你是一家公共公司，它并不是那么有趣。所以，如果你能保持私人，为什么不呢？“

The trend may become self-reinforcing, he says. “Since these companies are taking longer to go public, returns are increasingly captured while companies are still private. If returns are now captured in the private stage, that will be a driver for investors to invest in the private stage, rather than the public stage.”

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