Technology companies pre-IPO assessments

Technology-based companies have always valued public and private capital markets differently. 2016 has shown aggressive pre-IPO ratings of technology companies reminiscent of the 2000 Dot Com bubble. There are concerns that they may be too aggressive and that the market may return to a similar position at the beginning of the century.

The current pre-IPO firms are more diverse geographically than they were in 2000. It will be very interesting to see in which regions the accomplices will continue to dominate after the IPO. India and China appear to have an advantage in tripling their combined consumption base in the United States. It would also be important to note that their e-commerce markets are growing much faster. What has always benefited American companies and continues to do so today is their ability to expand into a global audience.

The ratings of Public Technology Companies have been fairly consistent.

In 2000, public technology companies valued 165% more than the general market. The valuation of public technology companies increased by an average of 80 times in 2000. In contrast, today’s public technology companies value their profits on average 20 times. Furthermore, we can see that, on average, only 10% are valued in the general market. Among public companies, there does not seem to be much risk of a bubble. Public companies seem to be much more consistent compared to private companies

The valuation of private technology companies has risen.

• The number of pre-IPO funding rounds has increased

• The average size of risk investments doubled between 2013 and 2015

• The size of the average deal was unknown to the market

• 2015 saw the highest number of agreements ever recorded

• Unprecedented increases in funding rounds

• Committed funds rose from 110B in 2012 to 150B in 2015 (the highest level ever).

Technology companies are also being private 3 times more on average. They are trying to avoid the IPO until they make a profit in accounting and get the basics. This means that in the IPO the company is bigger, more mature, more established and more prepared than ever.

Since 2000, the market seems to have taken a conservative look at the valuation of public technology companies. New start-ups may also be much more robust and deserve high pre-IPO ratings. Now any correction, if necessary, is likely to seem lighter than the latest technology bubble correction.