As a dad of twins, I’ve learned that looks can be deceiving. The current tech IPO drought, now in its third year, superficially resembles the post-dot-com era (2001–2003) or the financial crisis (2007–2008). Some might expect a rebound soon, drawing parallels to these past recoveries; however, a closer look reveals this market isn’t the twin of previous downturns we might assume it to be.
The tech IPO market’s paucity of late is no secret, but the magnitude of the downturn is truly staggering. In 2021, we witnessed a record-breaking 140 technology IPOs in the US, raising a whopping $74 billion (1). Fast forward to today, and the landscape is dramatically different. Last year saw only 6 tech IPOs, raising a total of $7.5 billion (2). To put this in perspective, that’s even lower than the 9 IPOs we saw in 2008 during the height of the financial crisis. This level of IPO scarcity in the tech sector is unprecedented in recent history.
Amidst this tech IPO drought, OneStream, a provider of software and services for the CFO office, officially launched the process for its own IPO, commencing its roadshow ahead of listing on the Nasdaq stock exchange in the coming weeks.
OneStream isn’t your average tech company. Its filings show robust financials, consistent growth (even during the pandemic), and a customer base featuring industry titans such as Toyota and UPS. The management team has successfully navigated the tricky transition to a SaaS model — no small feat in today’s market.
However, despite this undeniably impressive profile, OneStream is eyeing a valuation of about $4.38 billion — a significant markdown from their $6 billion private valuation in 2021.
It’s tempting to see OneStream’s move as the first robin of spring, signaling a thaw in the tech IPO market, but my personal view is less optimistic. The harsh reality is that companies falling short of OneStream’s high bar — and that’s most tech companies — will likely find the IPO window firmly shut.
Public market skepticism is already high, fueled by recent high-profile IPOs like Rubrik and Klaviyo, which have struggled to maintain their initial valuations post-listing. Rubrik’s share price dipped below its IPO price within weeks of its debut, while Klaviyo’s stock has experienced significant volatility since going public. Wall Street is raising the bar, and many companies simply won’t clear it.
My gut tells me we’re in for a prolonged period of fewer tech IPOs. The IPO volume we saw in the salad days of yore isn’t returning anytime soon. The ongoing AI hype further complicates matters, potentially overshadowing companies outside of this space.
Paradoxically, all of this makes me more excited about the opportunities we have at Vertex Ventures to invest in early-stage startups. OneStream’s push to go public shows that the best companies can still make it happen. While we might see fewer IPOs for a while, this environment compels startups to focus on real, durable growth rather than hype — a mantra we repeat daily at Vertex Ventures to anyone who will listen. Our world of tech startups has always been good at rolling with the punches, and I bet we’ll see some creative solutions emerge from this. We’re heading towards a stronger, smarter tech sector, and I’m genuinely excited to see how it all shakes out!
Originally published on Medium.