One-third of tech IPOs see valuations drain away
Why many tech companies cannot live up to investors' initial excitement
A third of tech companies that have IPO'd in the last decade are now trading beneath their initial valuation, according to fresh data.
Analytics firm Geckoboard's data showed that the 33 underperforming companies include Twitter, which was worth $24 billion at the end of its first day on the stock market, and is now worth half that as it continues to look for a buyer. Notorious flame-outs are present too, such as mobile game company Zynga, which has lost 66% off its IPO value after floating at $6.6 billion in 2011.
Some, however, are more surprising. Nutanix, for example - which had a phenomenally successful $5 billion IPO just last year - is trading down, having dropped 12% in value.
Geckoboard highlighted some key takeaways from this data for companies who are looking to IPO. One of the most surprising insights was that a large amount of pre-IPO funding does not necessarily translate to success.
It was actually the companies with the least funding in advance of their IPO that had the largest valuation growth, according to the research.
Having a good founding team is key, too. "Having partners in business is crucial. On average, it's the companies with three founders that achieved the highest average value growth since IPO 105%," Geckoboard said. It's also important to time an IPO right, and the peak age for a company to IPO is between six and 10 years, according to the research.
The data comes as the tech world waits for the rumoured IPO of Snap, parent company of Snapchat, which is said to be targeting a $25 billion valuation. If successful, it would make it the fourth-biggest IPO of the decade - but Geckoboard's findings suggests it may not retain its value for long.
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