Enterprise-technology ventures are going public at a record pace this year, with many more waiting in the wings, as they aim to cash in on higher valuations and rising corporate information-technology budgets, 451 Research’s M&A KnowledgeBase reports.
Over the first half of the year, 11 business-focused tech startups have made public-market debuts, with listings on the New York Stock Exchange or Nasdaq exchanges, according to the research group, which tracks market moves across more than 650 segments of the tech industry.
That compares to a full-year total of 12 initial public offerings last year, nine in 2016 and eight in 2015, the report said.
The data includes only IPOs by enterprise-focused startups that sell technology directly to other businesses, and excludes consumer internet, digital media, medical tech, biotech or other ventures, said Brenon Daly, the group’s research director.
So far this year, nearly all the enterprise-tech startups that have gone public are security and software providers, the report said.
Shares of Dropbox Inc., a data-storage and collaboration firm, rose sharply in its market debut in March, closing the day 36% above its IPO price and fetching a valuation of roughly $12.5 billion.
Earlier that month, cloud security software maker Zscaler Inc. saw its shares surge more than 100% in its first day of trading and reaching a market cap of $3.87 billion. As a group, these newly-public firms have increased sales by 30% to 60% year over year since going public in 2018, compared to single-digit growth at many tech giants, the report said, adding that their high valuations reflect the eagerness of “growth-hungry" investors.
The successful market debuts are also likely to prompt an “unprecedented flow of tech IPOs” over the final months of the year, the report said, citing some 40 enterprise-tech ventures that “are of a size and mind to go public at some point.”
Mr. Daly said, since issuing the report, there have been “only filings, but no pricings yet” among these ventures.
Apart from lucrative IPOs, more enterprise-tech startups are likely to be prompted to go public by rising corporate IT budgets.
In a recent survey of 46 CIOs by KeyBanc Capital Markets, roughly 40% said they expect IT budgets this year to be up 29%, compared to a year ago, which included responses by IT executives at companies in the finance, manufacturing and retail sectors.