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Illustration: Lazaro Gamio / Axios

Venture-backed tech companies are going public, but it’s less and less because they need cash.

The bottom line: For tech companies with access to seemingly unlimited private capital, other priorities — like founders' liquidity and market validation — eventually lead them to make the jump.

The influx of late-stage capital in recent years has made it possible for companies to delay going public. A year ago, the average company age at IPO was over 10 years, according to Pitchbook.

  • “It used to be that IPOs really were about generating growth capital,” says Lise Buyer, founder of IPO consulting firm Class V Group.
  • Now, companies can raise that capital privately, sometimes even from public market investors like mutual funds.
  • IPO contenders like Uber, Lyft, and Airbnb, for example, have raised billions of dollars already and could certainly raise more without going public.
  • The JOBS Act has contributed to the delays by raising the ceiling on total number of accredited shareholders a private company may have from 500 to 2,000.

The top reasons tech companies go public these days are liquidity for early shareholders and employees and market validation in the eyes of big customers and prospective M&A targets, says Barrett Cohn, co-founder of Scenic Advisement, an investment bank that works with private companies.

  • He points to the small floats of recent IPOs like Anaplan (12.7%), Elastic (10.1%) and Upwork (11.8%) as examples of firms that seem to want to be public companies without necessarily needing money from the market’s investors. (Buyer, however, suggests that these companies could be planning for subsequent public offerings at a later time.)
  • Spotify’s unusual path to the public market this year—a direct listing, through which it raised no funds at all — is another example where a company made the jump because it saw benefits in being public, rather than in the IPO process.

Yes, but: This is still a luxury reserved for the best and brightest stars. For a number of tech companies without exorbitant valuations and private investor appeal, the IPO remains a significant fundraising event. "It's a barbell," says Buyer.

Go deeper

Senate Democrats reach deal on extending unemployment insurance

Photo: Alex Wong/Getty Images

Senate Democrats struck a deal Friday evening to extend unemployment insurance in President Biden's $1.9 trillion COVID-19 relief package after deliberating and halting other action for roughly nine hours, per a Senate aide.

Why it matters: The Senate can now resume voting on other amendments to the broader rescue bill.

Capitol review panel recommends more police, mobile fencing

Photo: Olivier Douliery/AFP via Getty Images

A panel appointed by Congress to review security measures at the Capitol is recommending several changes, including mobile fencing and a bigger Capitol police force, to safeguard the area after a riotous mob breached the building on Jan. 6.

Why it matters: Law enforcement officials have warned there could be new plots to attack the area and target lawmakers, including during a speech President Biden is expected to give to a joint session of Congress.

Financial fallout from the Texas deep freeze

Illustration: Annelise Capossela/Axios

Texas has thawed out after an Arctic freeze last month threw the state into a power crisis. But the financial turmoil from power grid shock is just starting to take shape.

Why it matters: In total, electricity companies are billions of dollars short on the post-storm payments they now owe to the state's grid operator. There's no clear path for how they will pay — something being watched closely across the country as extreme weather events become more common.

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