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What is driving the current surge in tech IPOs? Startups are discovering that public markets are offering more favorable valuations compared to private funding, due to substantial investment from public investors eager to allocate capital to the technology sector. Contributing factors include anticipation of future growth, supportive monetary policies, increased participation from retail investors, a large number of unicorn companies prepared to go public when conditions are right, and evolving methods for companies to access the public market – all points Alex Wilhelm explored after analyzing recent listings and quarterly data concerning publicly traded tech companies.

Despite potential disruptions from various political and economic challenges, the impact on the startup ecosystem is already being felt. It’s worth considering this shift before the newsletter delves into topics like stocks, SPACs, emerging industries, and other resources for startups.

This wave of IPOs will generate a new cycle of wealth creation among startup employees, distributed more widely geographically than during the IPOs of companies like Facebook and Twitter. Some of these individuals will become investors and potentially launch their own ventures, while the now-public companies will recruit experienced professionals from larger organizations. These developments will further transform the landscape of tech recruitment, alongside other ongoing changes such as the rise of remote work.

Currently, founders establishing new startups have the opportunity to design long-term company strategies that were previously unimaginable to earlier generations.

In the next ten years, we may witness a startup going public after initially securing funding from pre-seed rolling funds, leveraging newly permitted crowdfunding, connecting with suitable VCs from the vast number currently operating, or even utilizing debt financing due to strong performance. It could remain private for as long as desired, utilizing the diverse financing and secondary market options developed over the past decade. When it ultimately decides to go public, it could choose from traditional IPOs, a SPAC merger, or a direct listing, prioritizing a shareholder base comprised of long-term supporters who have been involved with the company throughout its journey.

This current wave of IPOs also illustrates a significant change. The definition of “tech” has expanded beyond solely focusing on unprofitable, highly valued consumer tech companies based in San Francisco. Tech companies can now originate from anywhere, address practical needs, generate substantial revenue, and continue to expand – provided they are prepared to accept a degree of inherent risk. It’s no surprise that public markets are currently enthusiastic about the tech sector.

Consider Root Insurance, an insurtech unicorn that has already become a prominent player in the Columbus, Ohio startup community. As Alex explains this week, its recent IPO filing serves as a “startup Rorscach test,” offering both positive indicators (improving adjusted margins, revenue growth) and areas of concern (increasing losses, negative margins).

Here’s additional insight from the Extra Crunch article:

This week’s other filing comes from Affirm, which offers point-of-sale financing to consumers (avoiding the complexities of traditional credit cards). It also exemplifies how innovation evolves over time, offering valuable lessons for future founders studying today’s unicorn IPOs.

The company is a rapidly growing unicorn with a practical application, led by serial entrepreneur Max Levchin, who has significantly influenced the modern startup landscape – from co-founding Paypal and making numerous angel investments, to his involvement with Slide, a highly valued but unprofitable consumer tech company in San Francisco a decade ago. While not widely recognized outside the tech industry, Slide and other social media companies pioneered the growth and engagement strategies that subsequent startups have successfully implemented across SaaS, e-commerce, fintech, and other sectors. Today, Root, Affirm, and many other companies in this IPO era are building upon the lessons learned during those years.

Special Purpose Acquisition Companies are poised to offer significant insights, as an increasing number of startups are utilizing these investment methods to transition into the public market. Here's a current overview of developments, beginning with a noteworthy statement obtained by Connie Loizos from an industry source this week.

This observation arose during coverage of a SPAC launch spearheaded by a former executive from Uber, and Connie also investigated the balance of gender representation within this developing area of the financial sector. Similar to other segments of the financial world, the individuals participating are predominantly male – a trend that persists in startup funding generally, as Alex reports.

In other news, Catherine Shu analyzed the approach of struggling electric vehicle company Faraday Future regarding its SPAC intentions, and Alex provided a detailed assessment of the hurdles and potential benefits confronting Opendoor.

This year, our yearly event centered around mobility and the evolution of transportation took place virtually, resulting in a wealth of readily available conference reporting to share with our audience (and for Extra Crunch members). Below are some significant takeaways to guide your reading:

An analysis of current shortcomings within the micromobility sector.

The recent pandemic has sparked greater attention towards self-directed delivery services, though widespread adoption remains a considerable distance away.

Investment firms specializing in transportation indicate that increasing tensions between the United States and China will likely influence the mobility industry (EC).

Skyflow’s founder, Anshu Sharma, expressed his astonishment regarding the willingness of businesses to adopt a Software-as-a-Service (SaaS) Application Programming Interface (API) for essential functions like cybersecurity. He attributes this shift to the rapid growth of SaaS businesses, particularly those offering API services such as his own. Sharma notes that, drawing from his extensive experience in SaaS – including substantial agreements during his tenure at Salesforce – the scale of current projects undertaken by major organizations, including those in the banking and healthcare sectors, surpasses previous capabilities. He believes the industry has transitioned from questioning the viability of SaaS to considering why it wouldn’t be implemented.

Alex and Lucas Matney conducted interviews with prominent investors and founders within this rapidly expanding field, and a comprehensive report is available on Extra Crunch.

In related investor survey coverage, Mike Butcher examined the startup environment in Helsinki and is currently preparing a similar report on Amsterdam.

Across the week

TechCrunch

A Nobel Prize winner, Jennifer Doudna, offers her insights regarding COVID-19 and the CRISPR technology.

The realm of podcast advertising currently lacks sufficient market research data.

Continued support for developers remains crucial following the Google v. Oracle legal proceedings.

Dear Sophie: With a court halting Trump’s restrictions on H-1B visas, what steps can be taken to ensure employee eligibility?

A company focused on clean energy has achieved a market valuation comparable to that of ExxonMobil.

Extra Crunch

An analysis of Airbnb’s progress during the summer months is now available.

Accel venture capitalists Sonali De Rycker and Andrew Braccia report a very high level of investment activity in Europe.

Four environmentally responsible sectors present opportunities for both entrepreneurs and investors to profit while promoting sustainability.

Techstars highlights six promising startups in anticipation of its upcoming demo day events.

Venture capital firms are increasing their efforts to identify and fund exceptional early-stage companies in India to address funding shortages.

#EquityPod

From Alex:

Greetings and welcome to Equity, TechCrunch’s podcast dedicated to venture capital – now also available on Twitter! – where we analyze the figures behind the latest news.

Natasha was away on vacation this week, so Danny and I managed the show on our own. She will be returning next week, and we’ll be back to our complete team shortly.

Despite having a smaller hosting team, we still covered a significant amount of news. And Danny was particularly inclined to share some humor. Here’s a summary of what we discussed:

• Reddit co-founder Alexis Ohanian’s New Venture Fund Invests in Disposable Camera App: Danny and I considered ourselves well-suited to evaluate what’s currently trending, so we were the ideal duo to discuss influencers and emerging social applications. This particular app is quite interesting, and Ohanian’s involvement through his new fund was a key point.
• Zira secures $3.1M for its shift-scheduling service designed to manage hourly employees: I previously reported on this round, investigating Zira.ai and its offerings. Our assessment? It’s a promising service, but it functions within a highly competitive market.
• Shogun raises $35M to empower brands to compete with Amazon through faster, improved websites: This follows a similar pattern. It’s a compelling company with a strong product in a market with established demand – or total addressable market, to use industry terminology – and existing competition.
• Unqork’s $207M Series C highlights increasing enterprise interest in no-code applications: Another noteworthy funding round is the Unqork deal. Unqork provides a no-code platform that enables other businesses to develop applications. The company is experiencing rapid growth, making it a venture worth following.
• Mmhmm, a Five-Month-Old Video Startup Aiming to Enhance Virtual Meetings, Raises $31 Million Pre-Launch: Indeed, mmhmm has secured additional funding and, we’ve learned, may be launching this month.
• Remotion raises $13M to build a workplace video platform for brief, impromptu discussions: This round caught our attention, especially following the Slack news. The question remains: which company will create the future remote work communication platform that people genuinely enjoy using?
• We also addressed a range of other topics, including the FirstMark SPAC announcement, Root’s upcoming IPO, and further details regarding Airbnb’s anticipated public offering.

That was a comprehensive update. We did our best to cover everything. We’ll be in touch next week!

Equity is released every Monday at 7:00 a.m. PT and Thursday afternoon as quickly as possible, so be sure to subscribe on Apple Podcasts, Overcast, Spotify, and other podcast platforms.