THE 2010s — A STRONG DECADE FOR HIGH-GROWTH TECH IPOs
Going public is a milestone highly celebrated in the life of tech-focused businesses. In the last decade, the median time from founding to IPO was 8 years* filled with countless pivots until attaining product-market fit and experiencing high-growth all while attracting and retaining hundreds — and in many cases thousands — of new employees who share the vision and culture of the company. This period is also marked by numerous rejections from venture capital firms and sitting through hundreds of board meetings.
However, targeting for an IPO as the end goal is shortsighted for a founding team. The best run businesses in the world are publicly traded, many of which with decades of success. Take Coca-Cola, for instance, that celebrated its 100th year of being a public company in 2019. Long-term investors (I mean, really long-term) that bought into the Atlanta, Georgia-based shares in September of 1919 and kept them until today (after wars, recessions, dividends, stock splits, presidential elections and many other political and generational issues) have seen a return of nearly 13,000x excluding dividends.
AN OVERVIEW OF THE IPO LISTINGS OF THE 2010 DECADE
Beyond the headlines, an IPO should be treated as an individual story. Serious investors take a close eye in every new S-1 filling posted with the SEC, make their appropriate due diligence and decide whether or not to invest in a specific company. They also shy away from the so-called ‘specialists’ that rush to the TV and social media channels to declare a meltdown of a particular venture capital sector — or even the venture capital industry itself — every time there is a ‘failed’ IPO, because investing in the stock market is a long-term journey that brings extraordinary gains for the ones that keep with their decisions irrespective of speculative markets.
From 2010 to 2019, the public market gained access to 1,690 newly traded companies that combined raised over $435 billion, according to Renaissance Capital.
There are many relevant data points behind these two charts:
- While 2016 had the fewer listings of the decade by more than 20% compared to any other year (mainly as a result of ‘uncertainties’ of that year’s U.S. presidential election), that IPO class includes some high-flying tech companies including Twilio, Coupa and BlackLine, all of which have posted 100%+ returns to investors who entered.
- For the class of 2015, I selected 12 high growth tech-enabled companies and charted its returns from IPO until December 30th 2019. On average, investors enjoyed 4x gains compared to 0.9x if invested in the NASDAQ composite since January 2nd, 2015. The gain itself is impressive if considered on a portfolio basis and even more so if the portfolio was skewed towards Shopify (22.3x) and Square (5.9x). Among these selected companies, there is only one notable company (Fitbit) in negative territory and four with lower returns than of the NASDAQ.
Hence, stay invested can beautifully pay out to those that stomach all the noise of short-term volatility.
