Next IPO Wave: What Investors Need to Know

This is The TechCrunch Exchange, a newsletter distributed on Saturdays, stemming from the column with the same title. You can subscribe to the email version here.

Feeling exhausted? We understand. It’s been quite a week. However, if your attention remained on the financial markets rather than American politics, this week wasn’t marked by anxiety at all – it was a period of positive gains.

Indeed, the election results seem to be impacting stock performance, with investors expressing optimism regarding the possibility of a split government. The underlying assumption is that differing party control across government branches will result in legislative stagnation, preventing alterations to tax policies and regulations. You are free to assess the validity of this expectation.

In any case, the stock market’s upward trend this week was driven by several factors. Software companies experienced gains as the investment pattern seen earlier in the year resurfaced, with investors directing funds toward SaaS and cloud-based businesses in pursuit of growth opportunities. Initial software earnings reports have also been encouraging (we discussed results with JFrog, Ping Identity and BigCommerce), demonstrating improvement over previous results.

Uber and Lyft also saw their stock values increase following a California vote upholding their existing labor practices. Furthermore, Uber’s recent earnings report did not reveal any significant negative developments. A positive outcome, to say the least.

Major technology stocks also increased in value. To summarize, following a period of market uncertainty last week, conditions have become favorable once more for technology companies. As anticipated, this is stimulating a new series of initial public offerings.

Airbnb is anticipated to submit its IPO paperwork officially early next week (we’ve prepared four key questions we’re eager to have answered), and Upstart filed its IPO this week, an event you may have overlooked. That’s perfectly alright. We’ve got you covered.

DoorDash is another company potentially considering an IPO, now free from the financial burden of its costly legal challenges in California. How many new public offerings can we anticipate? We hope for a substantial number.

Market Notes

The initial public offering documentation from Upstart highlights a fintech IPO, and the company’s financial performance appears quite strong when concerns regarding its reliance on a limited customer base are set aside. This launch could signal positive momentum for the fintech industry overall, a segment of the startup landscape that, considering PayPal’s recent earnings, is experiencing a very successful year.

Venture capital firms specializing in fintech are also highly engaged, investing over $10 billion in startups focused on financial technology products and services during the third quarter. Startups in the areas of payments, insurtech, wealth management, and banking particularly stood out as areas to observe within this field.

However, the week wasn't entirely positive for fintech, as the U.S. government blocked the proposed acquisition of Plaid by Visa. This decision could potentially reduce the appetite for mergers and acquisitions involving fintech startups from larger corporations. Consequently, fintech IPOs may need to become the primary avenue for liquidity within the sector.

This possibility further emphasizes the significance of Upstart’s upcoming public offering. We will continue to provide updates on this matter.

• In other news, the Chinese government’s decision to halt the Ant Group IPO was likely the most prominent technology story of the week. While not directly a startup event given the company’s substantial valuation, it represents a setback for China’s ambitions to establish itself as a leading global financial hub. For Ant Group, it’s a significant obstacle, and for Jack Ma, it serves as a serious caution.
• Large funding rounds for neobanks continue to occur.
• Pony’s substantial funding round this week demonstrates that development in self-driving technology remains active. The pursuit of fully autonomous vehicles is ongoing, albeit at a slower pace than initially anticipated.
• Udacity demonstrated the growth in the edtech sector by securing $75 million in debt financing and reporting a 120% year-over-year increase in Q3 bookings, with average run rates up 260% in the first half of 2020. Natasha Mascarenhas also reported on increased merger and acquisition activity in edtech, indicating the sector’s rapid rise in prominence from a venture capital perspective during 2020.
• Hustle Fund received $30 million, and All Iron Ventures secured €66.5M, among other VC funding rounds completed this week.
• ByteDance is reportedly seeking $2 billion in funding at an $180 billion valuation. Additionally, what is the current status of the TikTok situation?
• The IPO filing of a competitor to TikTok underscores the challenges and considerable expense involved in creating a comparable social network.

Various and Sundry

Successfully remaining within our desired word limit – a feat it had been a while since I accomplished – I’m sharing a few brief updates and interesting points for your weekend reading:

• A helpful analogy using volcanoes to explain the changes happening in the financial technology sector
• Details on Fortnite’s strategy for a potential return to the iOS platform
• Despite filings with the SEC on Form D occurring on Election Day, we were still able to locate and analyze them
• A mix of positive developments and particularly encouraging news

Wishing you a pleasant weekend. Please prioritize your safety. Continue to take precautions against COVID-19. And consider listening to this.

Alex