A wave of US public listings and sales have resulted in a windfall for tech investors and employees, providing a record $582.5bn in earnings in the year to September.
Start-ups that completed initial public offerings, direct listings or deals with special purpose acquisition companies made up $513.6bn of the total, with 93 listings occurring between July and September — the highest of any quarter this year.
The data from PitchBook, which researches start-ups, showed that the total proceeds from sales and public listings was already twice as high as last year’s figure.
The rise in listings promises to deliver huge gains for venture capital firms and their investors, extending a hot streak of public market debuts going back to the IPOs of Airbnb, DoorDash and Snowflake last year.
Investors have pointed to the size of the recent so-called exits to justify a sharp jump in dealmaking this year, which has already exceeded last year’s record total by more than 40 per cent, according to PitchBook data.
The favourable market had encouraged some investors to raise the valuations of private start-ups to the point that public listings had become the only viable exit opportunities, said Andrew Adams, managing partner at venture firm Oak HC/FT.
“It puts a lot of pressure on building a great company,” Adams said.
While sales to companies and private equity sponsors make up the majority of start-up exits, large public listings represent a growing chunk of the proceeds from venture capital investments. Venture capital firms rely on exits to return cash to investors such as endowments and pensions.
The commission-free brokerage Robinhood produced the largest exit for investors in the third quarter after completing an IPO that gave it a market capitalisation of $32bn. Robinhood had raised about $5.6bn from private investors before the listing, including $3.5bn in convertible debt funding earlier this year.
Coinbase, the cryptocurrency exchange, completed the largest direct listing so far this year, hitting a market capitalisation of $76bn on its first day of trading in April. Coinbase raised less than $600m before its public debut, making it one of the most lucrative early venture investments in history.
Venture capitalists and other insiders typically must wait six months after a public listing to begin offloading shares, though direct listings have no restrictions on selling. Robinhood also relaxed some of the usual guardrails, allowing employees to immediately sell 15 per cent of their stock.
A broad swath of venture-backed companies have turned towards the public markets, which have recently become receptive to fast growing companies with slim or non-existent profits. Tech companies have completed more traditional IPOs in the US this year than in any year since 2000, according to Refinitiv data.
The flood of listings has also included several immature start-ups with minimal sales that went public through Spacs, an alternative to the traditional IPO that briefly gained favour among retail traders.
“People are rushing to the exit just so the door doesn’t slam right in front of them,” said Cameron Stanfill, venture analyst at PitchBook.