With a frenzy of technology IPOs expected to come to market this year, it’s worth noting that the days of getting in “on the ground floor” are all but over. Companies are staying private for longer (now 10 years on average), and are already valued at billions of dollars before hitting the public markets. Lyft, the latest to go public, starting trading at a valuation of $26.5 billion.
The chart below shows this phenomenon and what it means for investors. When Amazon went public in 1997, it was just 3 three years old and fetched an initial valuation of $600 million. $100 invested at the IPO price is now worth nearly $50,000! Compare that to Google and Facebook (with IPOs in 2004 and 2012) who were 6 and 8 years old and already worth $20B and $92B, respectively. $100 invested in those two more mature companies at IPO is worth just a few thousand dollars; still a decent return but hardly the returns of yesteryear!