After a slow 2016 in which both startup investment and IPOs fell, VCs are preparing for a busier 2017, as Snap Inc. and more plan to go public
Michael J. de la Merced / New York Times :
Context & Ripple Effects
This closes a two-year arc the coverage has tracked closely: delayed IPOs and rising private valuations kept startups private longer through 2015, then cooling private funding in early 2016 forced the question of whether late-stage companies could still raise at those marks. Both investment and IPO counts fell over the year, leaving venture firms sitting on mature portfolio companies with no exit window.
First-order effects
- Snap Inc.'s planned 2017 listing gives the market its first test case of whether public investors will pay up for a highly valued consumer tech company after the 2016 drought.
- Venture capitalists who spent 2016 unable to return capital now have a credible path to liquidity for their most mature holdings.
Second-order effects
- A successful Snap offering would reopen the IPO window for other late-stage startups that stayed private rather than price below their last round, easing the valuation pressure documented when funding cooled.
- Investment banks gain a pipeline of mandates after a thin 2016, and competing startups face a choice between rushing out behind Snap or waiting to see how its debut prices.
Third-order effects
- If the pattern holds, the industry moves back toward the public markets as the clearinghouse for late-stage valuations, unwinding the stay-private dynamic that defined 2014-2016 — though the later coverage of an expected IPO wave suggests the timing kept slipping well past 2017.
The trend: Tech exits are cycling back from a private-markets holding pattern toward public listings, with marquee names like Snap Inc. setting the pace for when the window opens.