While the pandemic forced businesses around the world to close their doors, often for good, one market was booming: initial public offerings (IPOs) by tech companies. Accelerated digitisation and a dearth of other growth investment opportunities made 2020 a record year for tech firms launching on public markets. But 2021 is set to break that record, as a cadre of digital innovators which thrived in the pandemic seek funding for their global ambitions.
Tech IPOs in 2020
In 2020, despite a brief dip at the start of the year, the number of tech IPOs globally increased 26% to reach 771, according to research from business intelligence provider GlobalData. The total proceeds of those launches grew even more, up 67% to $96.8bn.
US-based companies dominated the IPO market, in both deal volume and value. However, Chinese companies counted among the largest IPOs for the year. These included e-commerce platform JD.com, which raised $4bn, and games and online services provider NetEase ($2.7bn)
Big hitters in the US market included Airbnb ($3.5bn), food delivery provider DoorDash ($3.4bn) and cloud data platform Snowflake (also $3.4bn). The biggest European float was for Polish e-commerce company Allegro, which raised $2.5bn.
It is no surprise that e-commerce companies fared well in a year peppered with lockdowns across the globe. “People are already buying online, but last year they bought a lot more,” explains Suranga Chandratillake, general partner at London based venture capital firm Balderton Capital.
And while many consumers will return to their pre-pandemic shopping habits, for others the change in behaviour will persist, Chandratillake expects. “Of course some of them will go back, but some of them will also change their behaviour, and so there is the acceleration.”
The health of the technology IPO market also reflects the quality of the companies that have emerged over the last years, explains Chandratillake. “We have seen an amazing ten years.”
Looking ahead to 2021
The prospect of a permanent shift to online commerce has investors salivating for more tech IPOs, and 2021 is expected to be another record-breaking year. These companies are anticipating a flood of capital in 2021, and, as such, indicate the trends that will shape the digital economy in the near future.
Fintech IPOs in 2021
Fintech has been a vibrant market for start-ups in the past decade but is now showing signs of maturity, with a primordial soup of innovative hopefuls giving way to a few dominant platforms.
Stripe is a payment processing service that was founded by two Irish brothers in 2010. With revenues of $450m in 2019, the company topped CNBC’s Disruptor 50 list of start-ups last year. Stripe’s success has been attributed to its focus on design and user experience, making it as easy as possible for customers to make digital payments. According to Bloomberg, the company is hoping to raise funds at a valuation between $70bn and $100bn later this year.
Robinhood is a US-based investment app that exploded in popularity last year – and notoriety this week, after it blocked customers from buying certain stocks. By offering commission-free transactions, the app has triggered a boom in amateur investment – with often unpredictable results. The company’s revenues doubled between the first and second quarter of last year, up to $180m, and has been valued at $11.7bn. Until this week, the company had a captive audience of investors,
Coinbase is the world’s largest cryptocurrency exchange. The rollercoaster valuation of bitcoin tipped up in the first weeks of 2021, at one point reaching $40,000 – up 300% from March 2020. But Coinbase, which makes its money from commission on bitcoin trades and took $2bn in revenue in 2019, may have to convince investors it will be a more dependable asset for its IPO, expected early this year.
E-commerce IPOs in 2021
The e-commerce boom is expected to continue this year, with media agency GroupM forecasting an increase in global e-commerce revenue from $3.9trn in 2020 to $4.6trn in 2021. The food segment of the e-commerce market had been steadily growing before the pandemic, but exploded during lockdowns. Two of the biggest IPOs expected in 2021 are for companies that are well placed to profit from this.
Instacart was founded in 2012 by former Amazon engineer Apoorva Mehta and serves 500 retailers in 45,000 locations. During, the pandemic the company hired 750,000 gig workers to assemble grocery orders to deliver to people who were isolating, which more than doubled their valuation in 2020. Shares in rival DoorDash jumped 86% after its IPO in December 2020, so expectations are high for InstaCart’s float.
British takeaway delivery start-up Deliveroo lost a staggering £317.7m in 2019, on revenues of £771.8m. But an explosion in demand during lockdown helped the company turn a profit in the first half of its current financial year and an IPO is expected as early as April this year.
Social/gaming IPOs in 2021
Lockdowns pushed consumers to spend yet more of their leisure time online, and uptake of social and gaming sites reaped the benefits.
Roblox is an online gaming hub, founded in California in 2004. The company had planned to present an IPO in December 2020, but delayed due to competition from DoorDash and AirBnb. The company’s business has boomed over the past year, as daily users shot up from 17.6 million to 31.3 million. Roblox plans to follow other start-ups, including Spotify and Slack, by undertaking a direct listing rather than traditional IPO. This means that no new shares are created and they are sold directly to investors, not through intermediaries.
NextDoor is a hyper-local social platform that allows users to interact with their neighbours and follow local news. The app is currently available in 11 countries and was last valued at $2.2bn after a seed round in September 2019. The company announced in Q4 of 2020 that it will be seeking an IPO worth $4bn, but there has been some speculation that it could creep up closer to $5bn.
Bumble, a feminist dating app that gives its female users control over initial contact, has seen a swell in popularity over the past year. The company launched in 2014 and by the end of 2020 had 42.1 million users. Its total number of paid users increased by 19% year-on-year, while Tinder rose by 16%. The IPO has been predicted to be worth anything from $6bn to $8bn by Bloomberg.
Enterprise IT IPOs in 2021
UiPath is a robotic process automation company that uses artificial intelligence to build software robots, allowing companies to automate repetitive tasks. The company was founded in 2005 in Bucharest by Romanian entrepreneurs Dies and Tîrcă before going global. In early 2020 the company was valued at $10.2bn after raising $225m. UIPath filed for an IPO in December 2020 and is expected to go public in the first half of 2021.
Gitlab‘s applications help software developers manager their code from design to operations. Like Roblox, the company had planned to go public in Q4 of 2020, but removed that deadline in May when the instability of the pandemic hit the markets. The company, which has clients including Goldman Sachs and Siemens, says it has annual recurring revenues of $100m and was recently valued at $6bn.
With so many technology companies preparing to launch on the public markets, for such high values, memories of the dot-com bubble are sure to surface. But unlike in the late 1990s, the generation of digital business seeking to launch this year are mature and large enough to withstand market pressures, Chandratillake argues.
“Historically, technology companies have been private for maybe six or seven years,” he says. “A lot of the companies that are going public now have been private for ten years or more, and so these are mature businesses. This makes me think that these aren’t going to be things that will fall over unexpectedly overnight.”