How many rounds does it take to go public? 6

Venture backed companies have been staying private longer than normal because: i) private capital is readily available; and ii) public markets will beat these companies up on valuation as many have been overvalued by venture funds (see Blue Apron).  This led us to ask: how many rounds has it historically taken tech companies to go public?  Based on the data from 113 IPO’s, the answer is 4 preferred stock rounds (through the Series D) which really means 6 total rounds once you factor in the seed and angel rounds.  The data and observations are below. 

 

    S1 Round Total
Name Ticker Filing at Exit Rounds
SaaS        
2U TWOU 2013 Series D 4
Athenahealth, Inc. ATHN 2006 Series E 5
Bazaarvoice, Inc. BV 2011 Series E 5
Benefitfocus, Inc. BNFT 2012 Series B 2
Box, Inc. BOX 2014 Series E 5
BroadSoft, Inc.  BSFT 2009 Series E 5
Castlight Health, Inc.  CSLT 2013 Series D 4
Cornerstone OnDemand, Inc. CSOD 2010 Series E 5
Five9, Inc.  FIVN 2013 Series D 4
Hortonworks, Inc. HDP 2013 Series D 4
HubSpot, Inc. HUBS 2013 Series E 5
IntraLinks Holdings, Inc. IL 2010 Series A 1
Jive Software, Inc. JIVE 2010 Series C 3
Lifelock LOCK --- Series E 5
LivePerson Inc. LPSN --- Series D 4
LogMeIN, Inc. LOGM 2006 Series B 2
Marin Software, Inc. MRIN 2011 Series F 6
Medidata Solutions, Inc. MDSO 2008 Series D 4
MobileIron, Inc. MOBL 2013 Series F 6
New Relic, Inc. NEWR 2014 Series F 6
Proofpoint, Inc. PFPT 2010 Series F 6
Qualys, Inc. QLYS 2011 Series C 3
RealPage, Inc. RP 2009 Series C 3
RingCentral, Inc. RNG 2012 Series E 5
salesforce.com, Inc.  CRM 2003 Series D 4
ServiceNow, Inc. NOW 2011 Series D 4
Splunk, Inc. SPLK 2011 Series C 3
SPS Commerce, Inc. SPSC 2008 Series C 3
The Ultimate Software Group, Inc. ULTI 1997 Series B 2
Veeva Systems Inc. VEEV 2013 Series B 2
Wix.com Ltd. WIX 2012 Series E 5
WorkDay, Inc. WDAY 2010 Series F 6
Zendesk, Inc. ZEN 2013 Series D 4
Secureworks SCWX 2015 --- ---
Appfolio, Inc. APPF 2014 Series B 2
Atlassian Corporation TEAM 2015 Series B 2
Twilio TWLO 2015 Series E 5
Instructure INST 2014 Series E 5
Mindbody, Inc MB 2014 Series G 7
Shopify SHOP 2014 Series C 3
Xactly XTLY 2015 Series F 6
Nutanix NTNX 2015 Series E 5
Apptio APTI 2015 Series E 5
Blackline BL 2015 --- ---
Coupa Software COUP 2016 Series B 2
Okta OKTA 2016 Series F 6
Alarm.com ALRM 2014 Series B 2
Alteryx Inc AYX 2016 Series C 3
Amber Road AMBR 2013 Series E 5
Appian Corporation APPN 2016 Series B 2
Blackbaud BLKB 2003 --- ---
Callidus Software CALD 2002 Series G 7
Channel Advisors ECOM 2012 Series C 3
Cloudera CLDR 2017 Series F 6
Ellie Mae ELLI 2009 Series C 3
Everbridge Inc EVBG 2015 Series A 1
FireEye FEYE 2012 Series F 6
HealthStream HSTM 1999 Series C 3
J2 Global JCOM 1998 Series A 1
Mimecast MIME --- Series B 2
Mulesoft MULE 2016 Series G 7
NantHealth NH 2015 Series G 7
Paycom Software PAYC 2013 Series C 3
Paylocity Holding PCTY 2013 Series B 2
Q2 Holdings QTWO 2012 Series C 3
Tabula Rasa Healthcare TRHC 2015 Series B 2
Talend TLND 2015 Series H 8
The Trade Desk TTD 2016 Series C 3
Upland Software UPLD 2013 Series C 3
Workiva WK 2013 Series C 3
Yext YEXT 2017 Series F 6
         
         
Social Media        
Facebook FB 2011 Series E 5
Line Corp (in yen) LN 2015 --- ---
Linkedin LNKD 2009 Series D 4
Snap Inc SNAP 2016 Series F 6
Twitter TWTR 2013 Series G 7
         
         
Marketplaces        
Priceline PCLN 1998 Series B 2
eBay EBAY 1997 Series B 2
Sabre SABR 2013 Series A 1
Shutterstock SSTK 2011 --- ---
Match Group MTCH 2014 --- ---
Expedia EXPE 1999 Series B 2
Etsy ETSY 2014 Series F 6
Lending Club LC 2013 Series F 6
Elevate Credit ELVT 2014 Series B 2
Angie's List ANGI 2010 Series D 4
Zillow Z 2010 Series C 3
Groupon GRPN 2010 Series G 7
GrubHub GRUB 2013 Series E 5
Redfin RDFN 2016 Series G 7
Care.com CRCM 2012 Series E 5
         
         
Content Distributors        
Google GOOGL 2003 Series D 4
Yelp YELP 2010 Series E 5
TrueCar TRUE 2013 Series D 4
Netflix NFLX 2001 Series E 5
Pandora P 2010 Series F 6
         
         
Gaming        
Zynga ZNGA 2010 Series C 3
         
         
Ecommerce        
Amazon AMZN 1996 Series A 1
Blue Apron APRN 2016 Series D 4
Carvana CVNA 2016 Series C 3
Alibaba BABA 2013 Series A 1
1-800 Flowers.com, Inc. FLWS 1998 Series B 2
Shutterfly SFLY 2004 Series F 6
Wayfair, Inc. W 2013 Series B 2
Blue Nile, Inc. NILE 2003 Series E 5
Overstock.com, Inc. OSTK 2001 Series B 2
HSN, Inc. HSNI 2007 --- ---
LightInTheBox Holding Co., Ltd. LITB 2012 Series C 3
         
         
Payments        
Square SQ 2014 Series E 5
         
         
New Hardware        
Garmin Ltd GRMN 1999 Series A 1
GoPro GPRO 2013 Series A 1
Fitbit FIT 2014 Series D 4
Apple AAPL 1980 --- ---
         
MEDIAN --- 2013 --- 4
AVERAGE --- 2010 --- 4

 

-The median and average number of preferred stock rounds were both 4.  Note this data does not show whether there were multiple occurrences of the same round (for instance B, B1, B2) or bridge rounds.  Both are unlikely snice these companies all were successful enough to go public, but nonetheless the data is deficient from that standpoint.

 

-The data shows that public companies today are indeed taking on more private rounds before they go public than predecessors did.  The years shown above are when each company filed their last S1 – note sometimes they go public they year after they make that regulatory filing.  Two of the companies filed S1’s in 2017.  Both of those took 6 preferred stock rounds to go public.  Interestingly 10 of the companies listed above filed S1’s in 2016, taking 4 priced rounds to get there.  Finally 12 of the companies listed above filed S1’s in 2015, taking only three rounds to get to IPO. 

 

Finally, knowing that it generally takes 6 total rounds to go public, we can use that data to back into how much equity founders and employees can expect to own at each round.  Assuming a company sells between 20% to 35% of their equity at each round, the table below will provide some idea for how much equity founders and employees combined will own at each round prior to IPO/sale.  Again the data is imperfect, but certainly interesting. 

 

  Dilution at Each Round  
  20% 25% 30% 35%
Ownership        
Series D 26% 18% 12% 8%
Series C 33% 24% 17% 12%
Series B 41% 32% 24% 18%
Series A 51% 42% 34% 27%
Seed 64% 56% 49% 42%
Angel 80% 75% 70% 65%
Founding 100% 100% 100% 100%

 

The lesson: the fewer rounds you need to get to IPO/sale, the more equity you’ll own, so stay as cheap and lean as you can.    

 

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