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McKinsey & Company reports that fast-growing technology companies have fewer reasons to go public than they did in the past. In recent years, an increasing number of tech companies have achieved ‘unicorn’ status, that is valuations over $1b in private markets. At the end of 2015, 146 private companies were valued at that level, more than double the year prior.
Meanwhile, many companies that undertook recent IPOs have performed poorly with more than 40 percent of the unicorns that went public since 2011 either flat or below private market valuations. McKinsey reports there are even signs of a cooling in private markets as some asset managers mark down their stakes in unicorns by up to 50 percent. While software and online services companies in particular can quickly become billion-dollar giants, the recipe for sustained growth remains elusive. So what’s going on? What does this mean for the companies and their investors?
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