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Silicon Valley’s largest private tech companies are finally moving forward with their long-awaited plans to go public. The upcoming IPO of chip designer Arm will serve as a gauge for market sentiment and could pave the way for other companies to follow suit. Instacart, Databricks, and Socure are among the candidates expected to launch their own IPOs next year, according to insiders.
Arm’s IPO, expected to happen next month, is unique in that the UK-based chip designer was previously public before being taken private by SoftBank in 2016. While its history as a public company may make the transition easier, it also makes it difficult for other start-ups to draw conclusions from its success. Arm is one of the first major tech companies attempting an IPO in 18 months, as many well-funded start-ups, like Stripe, postponed their plans due to the volatility in public tech stocks.
According to sources, Instacart could be one of the first to go public before the end of this year. However, the company’s valuation has drastically dropped from $39 billion in March 2021 to $12 billion in May 2022. The decision to proceed with the IPO will depend on the stability of public markets in the later part of the year.
With Nasdaq recovering most of the losses from last year and increasing investor confidence, it’s likely that a small number of start-ups will revive their plans to go public. Josh Wolfe, co-founder of venture firm Lux Capital, believes there might be a limited IPO window later this year. When that happens, he expects “singular, category-defining companies” to have successful IPOs.
Databricks, a software company with over $1 billion in revenues and recent acquisitions, is considered a potential IPO candidate. However, insiders say they won’t be the first to list and will instead observe the outcome of Arm’s IPO. The retrenchment of private investors in the past year has fueled this urgency to go public, as venture capital fundraising and venture-backed exits have declined significantly.
ID verification company Socure, valued at $4.5 billion, hinted at an IPO in 2021 but postponed its plans due to market conditions. This year, they secured a $95 million credit facility and hired a new CFO with IPO experience. Socure is now preparing for an IPO as early as next year, according to founder Johnny Ayers.
Ayers believes that successful IPOs from established companies like Stripe, Instacart, or Chime could encourage more companies to go public. However, being one of the first to list carries risks and may result in a discounted price for shares. Investors are also keeping a close eye on Reddit, Discord, and Navan as potential IPO candidates.
Car rental app Turo, data automation firm Klaviyo, and Elon Musk’s SpaceX are also in the pipeline for potential IPOs. Turo filed an update to its IPO paperwork in March, signalling its commitment to going public. Klaviyo, last valued at $9.5 billion, confidentially filed to list in New York. As for Musk’s SpaceX, its recent valuation of nearly $150 billion makes it one of the most highly valued private companies, but Musk has not revealed any plans for an IPO.
Private companies hoping to go public after Labor Day in September will need to file paperwork this month, providing more clarity on market appetite for IPOs. However, sources indicate that Stripe will not be making a move this year, as the company recently raised funds through a private stock sale and sees no urgency to go public at the moment.
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