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State of the Technology, Media and Telecom Market Going Into 2020


What’s in store for middle market technology companies related to fundraising, investing, growth and exits, from mergers and acquisitions (M&A) to initial public offering (IPO)? Is the decacorn the new unicorn? These questions and more were on the minds of technology industry executives and investors at recent RSM Tech Connection events held in Boston and New York. Spotlighted during the session was Silicon Valley Bank’s (SVB) State of the Market’s 2020 report. The following is a summary of some of the hot topics from the discussion.

Below are a few key insights from the evening:

  • Venture capital deal-making remains robust
  • Over the past decade, global venture capital (VC) investment has grown over five times. VC investment in Asia, and specifically China, has grown the most rapidly at 18x. The United States has seen four times growth in VC over the past decade. In Boston specifically, the amount of VC capital has grown three times over the past decade.
  • SVB has coined an acronym, PIPO, signifying the private raising of capital in which a company raises in excess of $100 million. In 2019, there were a record 237 deals that were in excess of $100 million (see Figure 1). Valuations have been on the rise and less dilutive.
  • Seed and Series B rounds are earning higher revenue than a few years ago, but revenue reported by Series A and Series C companies remain consistent with prior years.

IPO market—is the decacorn the new unicorn?

  • Since 2013, “unicorn” has been used to describe a startup company with a valuation in excess of $1 billion. In 2019, it was not just unicorns having IPOs; there was a record number of decacorns, or companies with values in excess of $10 billion. Decacorns that are now traded publicly include Uber, Lyft, Slack and Pinterest (see Figure 2).
  • 2019 also had a record level of VC-backed IPOs. Internet companies like Lyft and Uber have struggled after their public debuts, but software companies like Zoom, CrowdStrike and New York’s Datadog performed quite well.
  • The Slack direct listing was only the second one ever (Spotify was the first, in 2018). Unlike a traditional IPO, a stock that launches through a direct offering arrives on a public exchange without the pomp and circumstance of a roadshow to woo would-be investors. This may be an increasingly popular option for companies looking to provide liquidity to investors. Airbnb is currently one of the largest unicorns and is considering a direct listing in the second half of 2020.
  • Wall Street will be looking for a combination of revenue growth with profitability in 2020 IPOs.  Investors are no longer rewarding top-line revenue growth at all costs.

M&A markets are heating up

  • Big tech companies have been highly acquisitive in the past decade. Google has been the most active in the M&A market this past decade, completing 146 deals (see Figure 3).
  • Corporate balance sheets remain flush with cash and it is expected that this trend will continue into the new decade. There is approximately $342 billion of cash on public tech company balance sheets, which is near record highs.
  • There are currently record levels of private equity dry powder waiting on the sidelines, eagerly awaiting opportunities to be deployed in high-growth technology companies.
  • Private equity is increasingly a buyer of VC-backed tech companies. In 2019, private equity accounted for a record high 30% of VC-backed technology company exits.

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