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The IPO window closed on SaaS
Stuck companies
More than 500 private SaaS companies sit between $100 million and $500 million. Their employees never got a chance to sell, because there are no annual tenders. Their investors have no exit either. They are stuck.
The 2021 class
The companies that did go public in 2021 are not an easy path to follow. A whole boat of them has struggled in the public markets. They traded at 30 times in 2021 and have since quadrupled in size, yet now trade at six times.
The missed window
AI natives, with their growth rates, sucked all the oxygen out of the room, and with it all the interest. For these private companies the window was missed. Not all of them are going away, and not all of them are getting vibe coded.
Why did companies stay private so long?
The Sarbanes-Oxley Act of 2002 raised the cost and effort of being a public company in the United States. Large pools of private capital later let startups raise big rounds without listing. Jay Ritter's IPO database at the University of Florida shows the typical age of companies at listing rising over the decades. Staying private became a viable long-term choice.
How do option grants fit with a long private life?
Stock options commonly expire ten years after they are granted. A company that stays private longer can outlast the options of its longest-tenured employees. Without a public market, there is no easy place to sell shares. Companies sometimes arrange tender offers, where outside buyers or the company itself buy shares from employees.
How did SPACs offer an alternative?
A special purpose acquisition company raises money through its own IPO and then merges with a private business, which becomes public without a traditional listing. SPACInsider counted 613 SPAC IPOs in the United States in 2021, a record. Many of the merged companies traded poorly afterward. New SPAC listings fell sharply in 2022.