In busier years for tech IPOs, the week after Labor Day is a brisk period for roadshows by companies looking to make an autumn market debut.
This year, however, isn鈥檛 playing out that way. None of the hot venture-backed tech companies seen as likely IPO prospects filed to go public in August. And while there鈥檚 still time to file and go public before the end of the year, there鈥檚 little indication of an appetite to do so.
鈥淭here will be no major pickup,鈥� said , partner at , an IPO adviser. While it鈥檚 possible we鈥檒l see some tech IPOs, she doesn鈥檛 expect to see a significant upturn in activity until the latter half of 2025 or even 2026 at the earliest.
Slower growth holding back new offerings
The forecast for a sluggish finish to the year follows several unusually boring quarters for the tech IPO market.
True, a few companies, including and , made well-received debuts this spring. A number of biotechs also carried out IPOs. But most weeks, the market has been uncharacteristically quiet. The postponement of Chinese autonomous vehicle startup 鈥檚 U.S. IPO last month added further to the sense of inactivity.
The dullness is noteworthy because by many metrics, it doesn鈥檛 seem like an especially terrible time to go public. The tech-heavy Nasdaq Composite Index is up 31% in the past 12 months. Large caps like , and are riding high. And the handful of tech companies that did go out haven鈥檛 performed badly.
Buyer, however, believes debut plans are getting delayed largely because many pre-IPO companies, particularly in enterprise software, are growing at slower rates than was typical during the bull market.
A few years ago, Buyer recalls, it wasn鈥檛 uncommon to see hot enterprise software companies growing revenue at 40% to 50% annually. These days, even top performers are likely to post annual revenue gains in the 20% to 30% range.
Valuation reset mostly complete
Buyer sees valuation concerns as a less pertinent factor holding back IPOs. Following the market downturn, scores of one-time unicorns had to take a valuation haircut. By this point, however, that process is mostly complete, even if not everyone is happy about it.
鈥淪ome management teams still think it鈥檚 temporary and still think valuations will go back up,鈥� Buyer said. 鈥淏ut valuations won鈥檛 reach that level again unless growth reaches that level again.鈥�
For now, even the hottest venture-backed companies are mostly holding off on market debuts. This is partly due to a 鈥測ou go first鈥� mentality, and partly to see if they can achieve higher growth rates and revenue, and thus secure a higher market cap down the road.
All told, the wait-and-see attitude made for a very sluggish August, which is often a much buzzier period for IPO filings. (In recent years, for instance, , and all filed in August.) There鈥檚 little indication September will be much busier, and companies will likely want to avoid making a debut right around the Nov. 5 presidential election.
Thus, it looks like those of us waiting for IPO action to pick up will have to set our sights on next year.
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