By Troy Hooper
The U.S. technology sector saw no shortage of blockbuster exits in 2020.
Airbnb, DoorDash and Snowflake all went public, accounting for three of the 10 largest U.S. technology initial public offerings of all time while Palantir and Asana listed their shares on the New York Stock Exchange directly.
Other venture-backed businesses like sports gambling site DraftKings and a parade of autonomous vehicle technology companies led by Luminar and Velodyne Lidar merged with special purpose acquisition companies, known as SPACs.
Yet others, including Intouch Health, Optimizely and TrueValue Labs from Mergermarket’s list last year, sold to strategic buyers.
With so many ways for startups to exit the private markets, what might 2021 bring? Several companies already have filed IPO registrations either confidentially or publicly, including Bumble, Coinbase, Poshmark, Roblox and UIPath.
What other venture-backed startups are likely to go public and which might sell to someone else in 2021? Here, Mergermarket sets out our top picks.
Wealth management startups like Betterment may become M&A targets amid ongoing consolidation by industry giants, Mergermarket reported last year. In December 2020, Betterment founder Jon Stein stepped down as CEO to make way for Sarah Levy, a former ViacomCBS executive, to lead it into its next phase of growth, which could include its transition from a private company to a public one. New York-based Betterment has a retail business, a 401(k) arm, and an advisor services platform.
CicleCI could look to follow other DevOps — which is the combination of software development and information technology operations — companies like JFrog and Atlassian into the public markets. The San Francisco-based company is well-funded after raising $100 million in Series E financing in the spring of last year, when CEO Jim Rose told Mergermarket it could eventually go public. A company sale is also a possibility, as Rose said CircleCI regularly receives interest from potential acquirers.
Another DevOps company that could seek an exit in 2021 is CloudBees. In July 2018, CFO Matt Parson told Mergermarket that CloudBees was 18 to 24 months away from reaching the size it would need to become a public company. Last June, however, he suggested CloudBees might need more time to grow revenues and demonstrate sales predictability before an IPO. A company sale is also possible, he said. The San Jose, California-based firm has raised $120 million and generates around $100 million in revenue.
Although he declined to provide a timeline, CEO Matt Cain told Mergermarket last June that the Santa Clara, California-based cloud database company has engaged banks about underwriting an IPO and it reports quarterly earnings like a public company. Couchbase anticipates its $105 million Series G, announced on May 21, 2020, will be its last private round before an IPO, he noted.
Last July, CFO Kenneth Hahn told Mergermarket that Coursera was focused on an IPO, which he said could come in a year’s time. Coursera’s leadership team has experience with public companies, he noted, and, although “very different,” he said the Mountain View, California-based provider of online education and certification courses could be compared to learning and textbook provider Chegg. Last month, Bloomberg reported Coursera was interviewing potential underwriters for an IPO that would value it at $5 billion.
CEO Robert Reffkin has been vocal about his aspirations to take Compass public. In November, the New York-based real estate brokerage and technology company reportedly tapped Goldman Sachs and Morgan Stanley as underwriters for a potential stock market listing. A report from Mergermarket in December 2019 noted that Compass would need to wait until at least 2021 to distance itself from shared workspace provider WeWork’s pulled listing in the fall of 2019. While the Softbank-backed company wants to IPO, it is possible it lands in the crosshairs of another entity. Mergermarket reported last March the New York-based brokerage could become a takeover target after it laid off hundreds of employees in response to the Covid-19 crisis.
The San Francisco-based company was eyeing the first quarter of this year for an IPO after volatility roiled the markets last spring, Mergermarket reported last April. It previously hired a CFO with experience taking companies public, and its financials have been IPO-ready for some time. Databricks, which uses machine learning algorithms to help businesses process data in the cloud, stands to benefit from Snowflake’s success.
The Santa Clara, California-based data management company has been eyeing a listing since at least 2018, when it confidentially filed an S-1 with the SEC, Mergermarket reported in October 2018. A couple of disappointing quarters, along with a series of layoffs, derailed a plan for DataStax to go public in 2019, but it has since overhauled its leadership team with executives who took Apigee public. In February 2020, Mergermarket reported DataStax was preparing for an IPO that could launch this year, depending on its quarterly performance and how it fared through the pandemic.
The Sunnyvale, California-based provider of cloud data protection and management expects to hit sufficient scale and financial predictability for an IPO this year or next, CFO Mahesh Patel told Mergermarket last July. Druva has long been aiming for an IPO but has been patient as it has been able to raise private capital at favorable terms, he said. The median size of startups going public has reached $250 million in annual revenue from $150 million a couple of years ago, Patel said, and it is targeting $200 million in annual recurring revenue by mid-2022. It can point to Datadog and New Relic as comps.
The San Francisco-based digital identity company sees itself as the next large public company in the identity cybersecurity market, CEO Fran Rosch told Mergermarket last April. ForgeRock has had casual conversations with banks about an IPO and was aiming to begin formal conversations this year. Publicly traded identity management companies currently include Okta and Ping Identity.
GitLab had planned to go public on 18 November but pushed back its IPO because of the flagging economy. Instead, TBEN reported it was allowing some workers to sell equity in an offering that values Gitlab at more than $6 billion. That is more than double the business’s valuation during a funding round in September 2019. GitLab has posted messages about its ambitions to go public on its website. Citing uncertainty caused by the pandemic, the company said it removed its targeted IPO date to allow it more flexibility.
CEO Beerud Sheth told Mergermarket in November 2020 that Gupshup could initiate an IPO process over the next 12 months or pursue a deal with private equity. The company is profitable, approaching $125 million in revenue annually and close to $20 million in EBITDA, he said. Gupshup has seen monthly revenue grow 50% month-on-month since early 2020, Sheth said, driven by the coronavirus pandemic.
The San Francisco-based online grocery delivery service appointed Goldman Sachs to advise on a forthcoming IPO, Fox Business reported in November 2020. A month earlier, it raised $200 million to keep up with consumer demand for its services, which spiked during the coronavirus pandemic. Over the past year, the company has expanded to more than 500 retailers and nearly 40,000 store locations.
Co-founder and CEO Sean Black told Mergermarket in October 2020 that the Atlanta-based home-buying startup was getting closer to its long-standing goal to list on the New York Stock Exchange. Knock has been eyeing the public markets since at least 2018 when Black disclosed it had reserved the ticker symbol KNOC with NYSE. Going public through a business combination with a SPAC is also under consideration after other real estate technology companies like Opendoor and Porch.com chose that path in 2020. Knock has received strong interest from SPACs, according to Black.
The Tampa Bay, Florida-based cybersecurity awareness training company has been “slowly” getting itself ready to reach SEC compliance measures to go public, CEO Stu Sjouwerman said last March. He said a listing could occur late this year or early next year. The company expected to start mock quarterly earnings this year as it prepared for a potential IPO, he said.
In June 2019, CEO Jason Gardner told Mergermarket the Oakland, California-based credit card processor and issuer had received buyout interest, but it was monitoring the health of the public markets. At the time, he said an IPO was around 18 months away. Marqeta began interviewing banks over the summer and in November 2020 it reportedly was working with JPMorgan Chase and Goldman Sachs on an upcoming IPO.
The San Francisco-based private social network for neighborhoods is reportedly deciding between a direct listing, an IPO, and a combination with a SPAC at a valuation expected to fall between $4 billion and $5 billion. SPACs have already approached the company about a sale, according to Bloomberg. It was valued at $2.2 billion when it raised $170 million in September 2019. Since inception, the company has raised about $470 million.
The San Francisco-based access and identity management company has received “a lot of interest” from potential suitors, CEO Brad Brooks told Mergermarket last April. With the company sitting at the intersection of the cloud and cybersecurity, Brooks said he expects to see more interest, as enterprise software companies with a lot of cash often look to acquire strong companies during or after a crisis.
The investing app popular with millennials has seen its user base and activity levels surge during the pandemic and has reportedly picked Goldman Sachs to advise on an IPO that could value it at $20 billion.
Last summer, Mergermarket flagged the San Francisco-based software testing startup as a likely sale candidate given the “white hot” DevsOps space. CEO Aled Miles said the company was focused on organic growth but acknowledged the flurry of consolidation in the DevOps space. The company’s former CEO, Charles Ramsey, told Mergermarket in June 2019 that Sauce Labs could grow its revenues to a point where it may be positioned to explore a sale or IPO this year.
The Indianapolis-based edge computing company was aiming to be “IPO ready” by the end of 2021, CEO Jeff Ready told Mergermarket in October. While it expects to be at the “size and scale” that would enable the company to have an IPO, he said an offering will depend on market conditions. Founded in 2007, the company has raised a total of around $100 million.
San Diego-based Seismic evaluated a potential IPO in 2020 but decided to wait as the Covid-19 pandemic introduced uncertainty, co-founder and CEO Doug Winter told Mergermarket in November. The company instead raised a $92 million Series F at a valuation of approximately $1.6 billion, announced in September. The round brought its total funding to about $270 million since it was founded in 2010. The sales software company “will definitely be prepping” for a public market entry during the next 18 months, he said.
SoFi, as the San Francisco-based online lender is known, got its start as a platform to refinance student loans but has since expanded into mortgages, investing and other financial services. In October, the company received preliminary approval for a national bank charter. It also spent hundreds of millions of dollars to put its name on a new NFL stadium in Los Angeles. The company has been eyeing an IPO for years, but those plans were put on hold after the departure of co-founder and CEO Mike Cagney amid allegations of sexual harassment. Now led by former Twitter executive and Goldman Sachs banker Anthony Noto, SoFi agreed to a deal with Social Capital Hedosophia Holdings V for a planned IPO totaling $8.65 billion.
As far back as 2013, Squarespace founder and CEO Anthony Casalena has told Mergermarket Squarespace is building toward an IPO. Three months ago, it appointed a CFO with experience working at public companies, and in December Bloomberg reported the New York-based website-building platform was getting close to mandating advisors for an IPO that could launch in this year’s first half.
The New York-based company has acquired a dozen companies over the past few years to grow its customer experience platform. A little over a year ago, CEO Ragy Thomas said an IPO would be the “logical” next step for the company and that it could begin preparing this year. Sprinklr was valued at $2.7 billion when it took $200 million from Hellman & Friedman in September. It generates $400 million in revenue.
The New York-based digital behavioral health company has received approaches from private equity sponsors, venture capital firms, SPACs and strategic buyers, Mark Hirschhorn, president, CFO and COO, told Mergermarket last month. An IPO is also possible, he said.
The Emeryville, California-based cybersecurity company has a valuation exceeding $9 billion after raising more than $900 million, including $150 million from crossover investors Fidelity Management & Research and T Rowe Price in October and Salesforce Ventures in June. Tanium began putting governance and accountability controls and reporting procedures in place back in 2018, and in an interview with Mergermarket in May 2020, co-CEO Fazal Merchant said it was putting more compliance controls in place. It has also made additions to its leadership team.
Founder and CEO Gary Hoberman told Mergermarket last May that the no-code software firm was six months away from looking for an advisor to help it go public in 2021. The macroeconomic uncertainty caused by Covid-19 should not impact Unqork’s ability to go public, Hoberman said. In early October, it fetched a $2 billion valuation in a $207 million Series C round led by BlackRock.
Boston-based Validity is likely to pursue an IPO in 2021 or 2022, founder and CEO Mark Briggs told Mergermarket in two separate interviews last year. The company, which is backed by Silversmith Capital Partners and Providence Strategic Growth, hired a CFO with public market experience in August. Validity is “highly profitable” and was expected to generate $200 million in recurring revenue last year.
New product offerings have provided a meaningful step forward in the Redwood City, California-based financial technology firm’s journey to become a publicly traded company, co-founder Dan Carroll told Mergermarket nearly a year ago. Although it started as a robo-advisor, Wealthfront added debit card and checking features to its interest-bearing cash accounts last year. Although it is building toward a public market exit, Carroll said Wealthfront is an “attractive” acquisition target for banks and other players interested in financial technology.
Based in Los Angeles, Troy Hooper is head of IPO content for Mergermarket.