2017: Strong performance for tech IPOs should help startup funding
About four in 10 startups have six months funding remaining according to an impromptu online poll of founders by CB Insights, which tracks venture capital investments.
The question: How long can you go before you need to raise again?
There were 224 responses:
- 39% six months
- 27% 1 year
- 13% 1 1/2 years
- 21% 2 years
Read this
The results show that a significant number of startups need to raise more funds but this doesn't mean that there is a bubble being popped. The majority of startups fail and a small number are acquired.
The most important factor in a healthy startup environment is a strong IPO pipeline of tech companies with solid revenues and predictable earnings.
In 2016 there were just 14 tech IPOs, compared with 28 in 2015 and 62 in 2014. CB Insights expects a larger number of successful IPOs in 2017 than in 2016 and is tracking 369 privately funded US companies considering an IPO.
So far 2017 is doing better than 2016 with several high profile tech IPOs. Snap is the largest IPO so far and raised about $20 billion; MuleSoft raised $2.8 billion; and Cloudera $2.3 billion.
This will help startups that are running out of cash to raise more money as financial institutions recover their profits from prior investments.
However, much will depend on the quarterly performance of the newly public tech companies. Snap first quarter results this week did not meet expectations and its share price plunged 24%.