The Wall Street Journal had a great summary of IPOs in 2021 and before.
One of the top takeaways is the sheet rate of IPO creation. Much as Unicorn creation more than doubled in 2021, so did IPOs:
There’s a lot you can read into this:
* First, it’s good IPOs grew as quickly as Unicorns were minted, more or less. A top liquidity worry we should all have is if there won’t be enough IPO demand for the ~1000 Unicorns. Traditionally, IPO demand has been fairly narrow and niche.
* Second, the “private markets” for SaaS aren’t that irrational. With the S&P up 25% this year, Cloud stocks still trading at higher multiples than pre-Covid, record growth in Cloud and SaaS spend, and a record IPO window … these are the best of times in SaaS. And you need an open IPO window for it all to really work.
* Third, the SaaS IPOs are mostly really, really high quality. Top SaaS IPOs are growing faster than ever. Samsara was growing 75% at $500m at IPO. Ditto Snowflake at $800m. This should keep at least some of the engine running for a while.
* Fourth, SPACs are something to worry a bit about. The quality of SPACs is simply lower than traditional IPOs. As you can see above, they were half the IPOs in 2021. However, few Cloud companies IPO’d with SPACs.
* Fifth, this is a record that may be hard to continue to sustain an beat. SaaS revenues will continue to grow at unprecedented rates, but still IPOs? It’s hard to say when you see the chart above. The “IPO Window” tends to slam shut in anything but the best of times. And for IPOs, 2021 really was the best of times. The best of our lifetimes.
So keep an eye on the rate of IPO Creation. When it slows down, Unicorn and Decacorn creation probably should, too.
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Jason Lemkin, Khareem Sudlow
