Are IPOs eating the tech world? A new SEP Report
Only 1,8% of tech scaleups worldwide went through an IPO despite going public boost the growth (5.5x more capital raised).
US stock markets are the most attractive for tech companies.
Nasdaq (with 182 IPOs) and NYSE (with 127) lead the Top 10 Stock Exchanges for Tech Companies.
Are we facing a “Scaleup migration” to the US markets from Europe, China and Israel?
Tel Aviv, June 4th, 2019 – The startup world is still mostly venture capital driven, according to the latest “Tech Scaleup IPOs 2019” Report – presented today in Tel Aviv Stock Exchange at the SEP Scaleup Summit, part of “SEC2IL – Startup Europe Comes to Israel“ mission funded by the European Union, organized by Mind the Bridge and co-organized with EIT – that analyzes the funding path of over 40 thousand tech scaleups across US, Europe, China, and Israel.
“So far only 1.8% of tech companies went through IPO, but going public seems to pay off. As a result there seems to be a growing appetite in public markets“, commented Alberto Onetti, Chairman of Mind the Bridge and SEP Coordinator.
As a matter of fact, since 2010, out of the 4 main world’s tech ecosystems (US, Europe, China, and Israel), “only” 750 tech scaleups went public. Out of the $1,212B invested in US, Europe, China, and Israel, $1,091B comes from venture capital (90%) (often as a needed stepping stone to fuel the pre-IPO growth), while “only” $121B was raised through IPOs.
Why is that? Whether stock markets are still not welcoming enough for emerging tech companies (requirements barrier?) or tech companies are not actually factoring the IPO option (culture gap? lack of liquidity in local Stock Exchanges?), it remains a question to be answered.
Data also shows that companies are taking longer to go public (from an average of 6.5 years in 2010 to a 8.4 years in 2018) while still 33% of tech companies manage to go public in full “bootstrapping” (without raising VC money).
“You need an IPO to raise a Tech Giant – added Alberto Onetti, Chairman of Mind the Bridge – Globally, on average, about one third of all largest tech companies (the so called Super Scalers) have gone public. Specifically for European scaleups the IPO path is necessary to raise substantial amounts: 70% of European Super Scalers are now public companies, versus 23% in the US and 26% in China”.
From 2010 to 2018 the report shows two “boom” years (2014 and 2018) which both saw over 100 IPOs. We expect this growing trend to continue also because in 2019 we will see a tech IPO Bonanza (Lyft and Uber went public in the first semester, while Slack and Pinterest are rumored to follow before year end).
Where to go public?
In general, when going public, scaleups raise on average $223M on stock exchanges in US, $191M in China, $76M in Europe and $11M in Israel.
US stock markets show to be by far the most attractive for tech scaleups, both in terms of number of companies listed (389, 52% of the total) and – particularly – of capital raised ($83B, 69% of the total). Europe follows with 179 IPOs and $13.2B, China counts 123 IPOs for $23.6B and Israel lags behind with 15 IPOs and $0.1B.
“If we look at the tech IPOs by origin of listed companies, a globally widespread phenomenon of “scaleup migration” versus the US stock markets is visible – ended Marco Marinucci, Mind the Bridge founder and CEO – Overall 74 tech scaleups went public on the US markets. The large majority (47, 64% of the total) are from China, followed by Israel (16 companies) and Europe (11)”.
Talking about money, $23.8B was raised on the US sole by these 74 scaleups. That means that the US stock markets accounted for 29% of the overall IPO funding of Chinese scaleups, 49% of the Europeans and 74% of the Israeli.
Top Stock Exchange for tech companies? Nasdaq (182 IPOs) and NYSE (127), followed by two of the main Chinese Stock Exchanges (the Hong Kong Stock Exchange (both main and secondary board, 46 IPOs), and the Shenzhen Stock Exchange (including both SME board and ChiNext, 63 IPOs)). The former shows to be financial center of China, the latter is becoming more and more the tech hub of the country. 5th position for the London Stock Exchange (including AIM, 76 IPOs), first European market in the ranking. The Frankfurt Stock Exchange (FSE, 8) Euronext Amsterdam (5), Euronext Paris (28), Shanghai Stock Exchange (14) and Australian Stock Exchange (33) do follow.