EquityZen's Blog On Startups and Their Economics

Why Venture Backed Companies Are Waiting Longer to Go Public

Shriram Bhashyam | December 26, 2014

Tech companies are staying private longer. Amazon went public in 1997, just two years after its first round of institutional financing, at a market capitalization of about $440 million. Compare that with on-demand ride service Uber Technologies, which remains private close to six years on and after recently raising $1.2 billion at a whopping $40 billion valuation.

According to the National Venture Capital Association, the median time to IPO exit since first funding for venture-backed companies was 3.1 years in 2000, and 7.4 years in 2013. Put another way, there are 49 U.S. VC-backed companies valued at $1 billion or more (affectionately called unicorns among the VC community), whereas in 2000, only 10 such companies were private. In fact, 35 US companies have raised venture capital at unicorn valuations thus far in 2014. That is more than all such fundraises for 2012 and 2013 combined.

Let’s dig beyond the trend. Why are tech companies deferring IPO?


As I noted, money is readily available in the private market. Indeed as VCs are writing bigger checks at higher valuations unicorns are less rare than they used to be. Plus traditional public market investors have joined the fray, bidding up valuations higher still. Mutual fund manager T. Rowe Price, for example, is an investor in unicorns Airbnb which raised private capital in 2014 at a $10 billion valuation (founded 2008); Dropbox which raised private capital in 2014 at a $10 billion valuation (2007); and newly public Lending Club (2006).

According to research firm Pitchbook, the median Series D pre-money valuation through the first half of 2014 was $190.6 million, versus just $66.1 million in all of 2010.

Median Pre-Money Valuations (Millions) by Series

For a discussion of other principal factors, continue reading at

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