Getting to IPO takes 4 to 9 years

How many rounds has it historically taken tech companies to go public? Based on the data from 125 IPO’s, the answer varies depending on industry. The data and observations are below.

Software businesses need 4 rounds. On median, publicly traded software companies raised through their Series D before going public. The median software company raised $113mm and IPO’d 9 years after founding. Note however the 5 companies that IPO’d in 2018 (Docusign, Smartsheets, Zuora, ZScaler, Dropbox) raised on median $286mm and took 12 years to IPO since founding, which does support the claim that companies are raising more from venture and staying private longer.

Social Media raises the most. Social media companies on median didn’t exit until after their Series F and raised on median $1.8bln of equity. Linkedin was the baby of the group raising only $117mm of equity before going public. It’s interesting to see that social media companies made it to the promised land faster — on median they took 7 years since founding to IPO whereas software took 9 years. Note Facebook and Snap took in $3.2bln and $2.7bln before going public

Marketplaces used the least capital. Marketplaces raised on median only $100mm of equity before going public. They only got through the Series C and exited 7 years after founding. The most recent IPO’s in the sector, Refin and Grubhub, raised $655mm and $500mm respectively.

Content distributors raised through the Series E. Content distributors went public after their fifth priced round, took 7 years, and raised on median $153mm. Spotify is the monster of the group having raised $2.4bln Euros through it’s Series C.

Gaming and Ecommerce are capital efficient. Relative to other tech peers, these companies raised far less equity prior to going public — $66mm and $69mm respectively. The gaming sector raised only through the Series B while Ecommerce went public after the Series C. The sectors IPO’d only 5 to 6 years after founding. Even newer ecommerce businesses like Blue Apron and Stitch Fix took only 4 and 6 years respectively, although note Blue Apron went through $200mm of equity and $94mm of debt to get there. Subscription food boxes are extremely capital intensive.

Hardware is a similar story. Hardware companies raised only $53mm of equity on median, exited after 11 years, and did so after the Series D. Roku, the newest addition to the group, required 14 years to exit going through their Series H and raising $239mm.

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 since these companies all were successful enough to go public, but nonetheless the data is deficient from that standpoint. The data does seem to show that some of the more recent IPO’s in the tech space did raise more than peers historically and stayed private longer.