Technology companies are evolving at an rate that hasn’t been seen before, and investment banks are having to adapt to keep up with them. Startups are gaining value early and often, which means they can postpone an initial public offering (IPO) longer than we’ve typically seen in the past. These rapid #startup valuations are changing how Wall Street banks work with tech companies and by staying private for longer periods, (according to The Wall Street Journal) startups have eluded the scrutiny of public-market investors that is needed to help companies mature and become sustainable.
For the anxious throng worried about spiraling startup valuations–a group now big enough to pass for conventional wisdom in Silicon Valley–#Zenefits could be the poster child for collective panic. The two-and-a-half-year-old company, which sells cloud software to help businesses manage h.r., payroll and benefits, has been bid up recently to $4.5 billion, a nosebleeding 45 times this year’s forecasted revenue and well into the “unicorn” stratosphere. The company is worth more than Sears and Columbia Sportswear and their combined two centuries of operations. Its value has increased $6.6 million for every workday it has been in business.
Consumer-technology companies can acquire 100 million users — an important milestone — more quickly than ever before. Enterprise companies are getting hold of exciting new technology at earlier stages in their development as well.
The first interaction with a company could be advising on an early fundraising round, rather than an initial public offering. A company could need help going global or in branding as a private player long before it is interested in a sale.
Stock-market volatility and a weak crop of initial public offerings are encouraging some investors to push back against private technology companies trying to raise funding at lofty valuations, but…
Startups are still raising venture capital at a blistering pace, collecting $19 billion in the third quarter, the most in a three-month period since the fourth quarter of 2000, according to Dow Jones VentureSource.