Weekly Update #113: Slowdown in Tech IPOs

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Weekly Update #113: Slowdown in Tech IPOs

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Hello Investors,
There's a great article from Wall Street Journal reporter Rolfe Winkler about the slowdown in Tech IPOs. Rolfe also had the pleasure of a polite back-and-forth on Twitter with VC Marc Andreessen on his thoughts about a bubble and tech IPOs:
I think Marc and Rolfe both have valid points (and highly recommend Rolfe's article). In addition, it's worth noting:
  • The disconnect on valuations between Public + Private also relates to data points. We simply get more data points (via stock price trades) in the public markets vs private markets. ZenDesk (Symbol: ZEN) trades 775,000 shares a day. Private company Zenefits has only raised money once in the past 15 months. The reaction in private market valuations won't be immediate.
  • Founders + VCs are getting what they want in private "Unicorn" financings, but employees are not. Consider:
    • Founders get: the "Unicorn" status symbol + marketing (Mostly to hire top talent)
    • VCs get: liquidity preference and other protective provisions for their investment (board seats, first-money-out, anti-dilution)
    • Employees get: subordinated on the cap table, and have to wait longer for liquidity

There needs to be more education in the space for current/former employees on what this all means for them:

  • If companies do eventually go public, then employees will (probably) do well
  • If companies do well and get sold, then employees will (probably) do well
  • If companies don't do well and get sold, then employees will *not* be okay (Good Technology, for example)

And as an extension of the need for more employee education, there ought to be more education for secondary investors in the pre-IPO space, as they'll most often be purchasing common stock from current and former employees (and therefore be subject to the same scenarios in IPOs and acquisitions).

In Other News... 
Technology companies’ share of U.S. initial public offerings has fallen to a seven-year low.
Looking at historical IPO data to predict what VC-backed Pure Storage's IPO might look like.
What Makes Uber Run (Fast Company)
Max Chafkin spends months with Uber CEO to write an in depth piece about Travis Kalanick and the company he created.
True Ventures turned 10 years old this month, and it has plenty to celebrate.
Square plans to hold its initial public offering in the fourth quarter of this year, people with knowledge of the matter said.
New York-based Union Square Ventures has made prescient bets on some of consumer tech's biggest wins. CB Insights digs into what, where and with who USV is investing.
Phil Haslett | Founder & Head of Investor Relations | EquityZen 

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