Something I find interesting about early technology IPOs is how early they IPO-ed compared to more recent tech companies and how much of their growth and value creation happened post-IPO.
- Microsoft IPOed in 11years, profitable and at a ~$800M valuation. They hit a ~$1T valuation in 2000. During the 90s, their stock roughly doubled each year, for a 1000x growth.
- Amazon IPOed in ~3 years, unprofitable and at ~$300M valuation. Their stock has 2200x since then.
- Google IPOed in ~6 years, proftiable and at a $25B valuation. Their stock has ~80x since then.
- Facebook IPOed in ~8 years, profitable and at $100B valuation. Their stock has 20x since then.
I think the ZIRP era led many companies to avoid going public, either because of access to easy money or because their financial didn't need to be disciplined enough. The high levels of pre-IPO funding also has led to many/most of them underperforming in the public markets.
Regulatory compliance like Sarbanes Oxley is another huge factor. And VC's having large capital pools make it easy for companies to stay private vastly longer without needing to raise funding from the public.
It's very unfortunate for the public markets, as basic only VC's and PE get access to high growth young companies. Now most of the growth is squeezed out by the VC's and the public gets just the tail end of mature companies.
A lack of IPOs makes the startup life much less attractive than sitting around at a post-IPO company, which also means a harder time growing the startups the VCs are investing in
I guess it also likely not helpful to the VCs to have the public market having real opinions about the valuation that the fees are presumably based on, unless the company is a clear runaway success
There’s some market/observer bias in these numbers; they hit four very different eras of VC and public markets perspectives on tech stocks.
VCs in the Microsoft IPO era would proudly display a tombstone for a $50mm IPO raise. It was a very different time.
Google was the first tech company to really test the bounds and power of Investment banks in the IPO process — they went with some sort of auction type mechanism (if I recall correctly), intended to keep bankers from making “too much” on the IPO, and were roundly snubbed by the sell side arms of those same bankers, resulting in a very low flotation. Which worked out fine for them.
By the time Zuck IPOed, he had enough power and we had enough tech history that he was able to run a MAJOR IPO and retain complete control of the company. And, from a financial perspective, very well deserved.
In each of these four eras, the perceived (and actual I guess) size of the addressable market for a tech company was roughly an order of magnitude larger than the prior, and combined with wealthier VCs from prior rounds, and more pattern recognition about business models, we see more of the value being captured early, out of the public markets.
Yeah but that was their worst moment. Michael Dell joked someone should buy Apple for a few bucks and put them out of their misery.
Of course history went another way but it was pretty close. And really, Steve Jobs wouldn't have been the leader he was without NeXT and Pixar. It was unfair how he got fired by Pepsi guy (Edit: That was John Sculley, I had forgotten his name) but he wasn't ready to lead Apple the size it was at that time. Things just came together at just the right moment.
I have occasionally wondered about that. If Steve Jobs did not get fired by Sculley, would we still have the Apple we do today. I lean towards unlikely. I do think Steve had some growing up to do.
I still hold the theory that the entire success of Apple post-1997 hinged on iTunes for Windows.
iMac and iPod were good products but iPod was stumbling along as a Mac-only product. Letting PC users use iPods opened the cash floodgates and let the iPhone get developed.
> Something I find interesting about early technology IPOs is how early they IPO-ed compared to more recent tech companies
I am unable to resolve this sentence with the list that follows that has Microsoft IPOing significantly later in their life than the three others listed. Microsoft IPO'ed later compared to Amazon, Google, and Facebook.
Yup. Strikes me as obvious that folks figured out how to get in there earlier rather than leave it to the public markets. Just sort of speaks to a combination of market efficiency plus increased regulation in my mind.
Most of people's issues with the Securities Exchange Commission came from changes in corporate behavior that made people notice they had an issue with the Securities Exchange Commission
the SEC's class dividing rules were ignorable when companies were IPOing at low marketcaps
people don't want to only buy companies after all the growth is seemingly done at 50bn-100bn+ marketcaps, while not having access to private markets or low liquidity in private markets
so they pursue things outside of the SEC's protection
- Microsoft IPOed in 11years, profitable and at a ~$800M valuation. They hit a ~$1T valuation in 2000. During the 90s, their stock roughly doubled each year, for a 1000x growth.
- Amazon IPOed in ~3 years, unprofitable and at ~$300M valuation. Their stock has 2200x since then.
- Google IPOed in ~6 years, proftiable and at a $25B valuation. Their stock has ~80x since then.
- Facebook IPOed in ~8 years, profitable and at $100B valuation. Their stock has 20x since then.
I think the ZIRP era led many companies to avoid going public, either because of access to easy money or because their financial didn't need to be disciplined enough. The high levels of pre-IPO funding also has led to many/most of them underperforming in the public markets.