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Tech IPO Pipeline | 2012

The Tech IPO Pipeline

There are 472 venture capital- and private equity-backed technology companies in the United States today with valuations, real or rumored, of greater than $100 million. This report will help shed some light on what industries the most promising private companies are targeting, where they are based, who has invested in them and more.
Before we dive in to the data, it should be clearly noted that not all 472 of these firms will make it to an IPO. Some have just crossed the $100 million valuation threshold and still have a lot of work to do before they are deemed public market worthy. Others among this 472 will be acquired along the way or will never actually breakthrough to the level needed to be considered IPO-worthy. And some will just falter and get out-executed and will never see a liquidity event. But as of this moment, these 472 companies represent the cream of the crop within VC and private equity portfolios, and if they continue their product, market and financing momentum, they may be on their way to an IPO. Below is a breakdown of some of the trends observed across these firms:

Building Big Companies Requires Big Money Capital efficiency is the mantra of tech investors and while it is certainly true that building v1.0 of an internet or mobile company has become cheaper and easier than in the past, becoming big requires money. And beyond your internet and mobile companies, companies in areas like telecom devices & equipment and semiconductors continue to require large investment. Distribution, sales and infrastructure cost money, and lots of it as evidenced by the over $40 billion invested in these companies since 1998. The median funding amount per company on the list is $75.8 million and the average is $84.7 million. B2B Wins Revenue Models Are Important Whether it is selling to the enterprise or the SMB market, the Tech IPO pipeline clearly leans in favor of B2B companies with 80% of companies targeting their products and services at businesses. While there is a lot of chatter today about the ascendancy of the enterprise and the deceleration of interest in consumer-focused companies, the reality is that B2B companies have been a place where investors have allocated money for some time. Valuation Diversity The companies in the pipeline cover a wide spectrum of valuations with some just entering nine figure valuation territory through to firms valued in the billions (for example, Palantir, SurveyMonkey, Coupons.com)

Sequoia Capital and Intel Capital Lead The top 10 investors (based on # of tech IPO pipeline companies they have invested in) includes many of the storied firms of venture capital and is led by Sequoia Capital and Intel Capital. Interestingly, the only non-VC institution in the top 10 is Goldman Sachs. Private Equitys Prominence While tech is generally associated with venture capital, almost 1/5 of the companies on the list are backed by private equity firms who either invested in large expansion capital rounds or in take-private transactions (such as Blackboard and Sabre Holdings). From a valuation perspective, some of the largest companies in the tech IPO pipeline are funded by well-heeled PE investors. Mobile & Telecoms Ascent From an industry perspective, almost 50% of the tech IPO pipeline is comprised of internet companies followed by mobile & telecom companies. Within mobile & telecom, most of the companies are not at the application level but at the telecom services and infrastructure level (think wireless connectivity and broadband services). California Sits at the Top. NY and Mass vying for #2. Not surprisingly, California is home to nearly 50% of the Tech IPO pipeline companies. NY which overtook Massachusetts as the #2 destination for tech VC funding was one company ahead of Massachusetts (41 to 40) putting the two east coast states in a virtual dead heat. Texas and Washington rounded out the top 5 followed somewhat surprisingly by Florida which was just one company behind Washington (17 vs. 16).

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Tech IPO Pipeline | 2012

Want the list of all 472 Tech IPO Pipeline companies?

Get the full list in Excel in the CB Insights DataStore. Just visit:
http://www.cbinsights.com/datastore/product/tech-ipopipeline-companies/

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Tech IPO Pipeline | 2012

$40 Billion Has Been Raised by Tech IPO Pipeline Cos.

Getting to the $100 million valuation level and beyond as several of the companies have done requires significant capital as evidenced by the significant amounts of capital these companies have had to raise. The average and median amounts raised by companies in the Tech IPO pipeline stands at $84.7 million and $75.8 respectively.

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Tech IPO Pipeline | 2012

Software-Oriented Businesses Are Most Capital Efficient

When we peel back the median amounts raised by sector, we see that software and internet companies in the Tech IPO pipeline have raised the least amount of total funding. This is not terribly surprising given the manufacturing, R&D and other infrastructure costs associated with areas like computer hardware, telecom services and chips & semiconductor firms.

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Tech IPO Pipeline | 2012

Sequoia and Intel Capital Lead the Pack

Sequoia Capital and Intel Capital are tied having the most tech IPO pipeline companies in their portfolios. The graphs below illustrate when each of the top 5 investors first invested in a tech IPO pipeline company. As can be seen Accel and Sequoia are the best at getting in early (seed and Series A). Also worth noting, a total of 444 investors have invested in at least two tech IPO companies.
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Investors that round out the top 10: 6. DAG Ventures (25) 7. 8. 9. 9. 9. Goldman Sachs (23) Greylock Partners (22) Benchmark Capital (21 tie) Menlo Venture Partners (21 - tie) Institutional Venture Partners (21 - tie)

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Tech IPO Pipeline | 2012

B2B Crushes B2C

Whether they are targeting enterprise or SMBs, the companies in the Tech IPO pipeline are heavily B2B focused (where the path to revenue is much clearer). Less than 20% of companies are B2C focused and among those, many are in the ecommerce space where the revenue model is also clear. Ad-driven models generally are few and far between.

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Tech IPO Pipeline | 2012

Great Cos Take Time. And Can Survive Nuclear Winters.

A look at when companies first raised financing reveals some interesting stats. The highest # of companies in the Tech IPO Pipeline were first financed in 2007 right before the recession and Sequoia Capitals now famous RIP Good Times declaration. Getting funding prior and ultimately surviving a nuclear winter seems to yield good results. On the perhaps more sobering side, 1/3 of companies first received financing more than 7 years ago. Not breaking news, but building a company is hard work.

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Tech IPO Pipeline | 2012

Is Private Equity Crashing the Tech Party?

While tech is often synonymous with venture capital, the tech IPO pipeline sees almost 20% of companies backed or owned by private equity firms. Generally, most of the pipeline is mid- to later-stage companies with 90% being Series C or later.

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Tech IPO Pipeline | 2012

Internet Companies Are ~50% of the Pipeline

As might be expected, internet companies are the biggest portion of the Tech IPO pipeline. Mobile & telecom companies are second with the majority being infrastructure/service plays versus application companies.
(more industry details on next page)

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Tech IPO Pipeline | 2012

The Tech Industry Landscape is Extremely Diverse

Looking at the internet and mobile sectors, we see that while a few industry categories have the most deals (eCommerce, ad tech, telecom services), the overall picture is quite diverse.

Note: We track over 50 industry categories on CB Insights. Those companies falling into industry categories that did not have at least 4 companies were grouped together into Other.
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Tech IPO Pipeline | 2012

California Wins. NY and Mass Battling for #2.

Not surprisingly, California is home to nearly half of the Tech IPO pipeline companies. 81% of the states 222 tech IPO pipeline companies call Silicon Valley home. 43 are based in Southern California so on a standalone basis, Southern California actually has more tech IPO pipeline companies than either NY and Massachusetts. When California is considered in aggregate, New York edged out Massachusetts for the #2 spot. Florida which is typically not in the league tables for VC funding had several private-equity backed tech companies on the list making them the somewhat surprising #6 market behind traditional VC power Washington state.

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Tech IPO Pipeline | 2012

Sector Diversity? Cali Reigns. NY All-in on Web/Software.

A breakdown of the top 3 geographic markets by sector highlights the multi-headed monster that California is with significant exposure to internet companies as well as electronics and computer hardware & services. Massachusetts also shows diversity, albeit less, with representation in all tech sectors. NY as it is in VC financings/deals is an internet/software-focused town with 90+% of deals in those spaces. Specifically, within the internet, NY is very ad tech and ecommerce driven.

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Tech IPO Pipeline | 2012

A selection of Tech IPO pipeline companies

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Tech IPO Pipeline | 2012

Want the list of all 472 Tech IPO Pipeline companies?

Get the full list in Excel in the CB Insights DataStore. Just visit:
http://www.cbinsights.com/datastore/product/tech-ipopipeline-companies/

www.cbinsights.com