CB Insights recently published its seventh annual Tech IPO Pipeline Report.  The report notes that in 2013, the median time between first funding and IPO for U.S. VC-backed tech companies was 6.9 years compared to 10.1 years for tech companies that went public in 2018.  As we have noted in previous posts, tech companies continue to raise more significant amounts of funding prior to undertaking their IPOs.  In 2018, tech companies raised, on average, $239 million before undertaking their IPOs, which is almost 1.4x the amount raised in 2017, and over 3.7x as much as 2012 figures.

The number of new private tech unicorns has outpaced the number of tech IPOs in 2018.  After 2014, tech IPOs declined significantly and have remained at those depressed levels, with only 19 tech IPOs in 2018.  By contrast, there were 45 tech companies that became unicorns in 2018.  The mega-round financing trend, wherein companies raise over $100 million per round, was also prevalent in the tech-sector, with almost 120 mega-round financings completed in 2018.

Tech-focused private equity firms continue to acquire majority stakes in tech companies that are nearing liquidity opportunities, whether IPOs or M&A exits.  However, M&A exits continue to replace IPOs.  The report cites as examples Qualtric, Adaptive Insights, and AppNexus.

The number of small businesses in the United States continues to climb, according to a recent CB Insights report. In 2015, there were approximately 31.9 million small businesses in the United States. There are now an estimated 39.9 million small businesses, with a projected 2.6 million additional firms expected by 2020. Defined as firms with 0-49 employees, small businesses are active in a wide variety of industries with healthcare, hospitality/food services and retail trade as the top three sectors.

While U.S. small business growth is promising, many small businesses face difficulties accessing capital. According to a Federal Reserve survey cited in the report, 44% of employer firms noted credit availability or securing funds for expansion was a major challenge. Accessibility to funding, however, seems not to have slowed the growth in the fintech sector.

Fintech startups have raised over $10 billion in funding since 2013. Small business payments companies have raised approximately $3.9 billion in funding since 2013. Accounting/tax and fundraising fintech small businesses follow with $2.1 billion and $1.7 billion of funding secured, respectively, since 2013.

For additional trends affecting small business and fintech, see CB Insights’ report: https://www.cbinsights.com/reports/CB-Insights_The-US-Small-Business-Fintech-Report.pdf

More companies continue to raise large sums of capital through late-stage or pre-IPO private placements as they prepare, or in some cases delay, going public. Tech companies are among the most highly-valued of these private companies. A recent study by CB Insights looked at the capital raised by tech companies that went public in 2018. It was found that, on average, these companies raised over $103.0 million in pre-IPO funding. This is almost 2.5 times more than capital raised in 2017, in which tech companies raised $41.9 million, on average, before their IPOs. Xiaomi Corporation and Spotify Ltd raised the most capital pre-IPO with $3.4 billion and $2.3 billion of funding secured, respectively. 2019 promises to continue the trend of larger pre-IPO financings, with companies that have raised as much as $16.9 billion poised to go public next year.

According to a recent research report by CB Insights, in the third-quarter of 2018, there were 375 VC-backed equity financings that raised over $5.64 billion for fintech companies globally. In total, 1,164 fintech financings have been completed in 2018, through October 31, raising over $32.6 billion in offering proceeds.  Approximately 40% (462) of these deals are from U.S. issuers.  Payments, alternative lending, and capital markets tech companies accounted for the majority of fintech financings, with 169, 145 and 141 deals completed in 2018, respectively.

The fintech sector also continues the trend of late-stage financings for companies that wish to remain private.  In the United States, there were 17 mega-rounds, or financings of over $100 million each, completed by fintech companies. There are now 34 fintech unicorns globally, valued at $117 billion, in aggregate. 21 of these unicorns are U.S. companies, with four having completed mega-rounds in 2018.

To read CB Insights’ full briefing report, click here.

 

Thursday, December 13, 2018
1:00 p.m. – 2:00 p.m. EDT

Despite market volatility, 2018 has proven to be a strong year for IPOs. Under the right circumstances, an Up-C structure implemented in connection with an IPO has the potential to deliver significant economic and tax benefits to financial sponsors and other selling shareholders.

During this session, Partners Anna T. Pinedo and Remmelt Reigersman will explain:

  • When an “Up-C” structure might be appropriate for an IPO candidate
  • Documenting the arrangements
  • Addressing the tax receivable agreement
  • The benefits to various stakeholders
  • Life as a public company with an up-C structure and how it impacts financial and SEC reporting
  • Undertaking acquisitions using an up-C structure
  • Unwinding an up-C structure

After this session, attendees will:

  • Understand the components of an up-C structure and when to implement
  • Counsel clients on the benefits of an up-C structure
  • Understand the economic and tax benefits to financial sponsors

Intelligize will provide CLE credit. For more information, or to register for this session, please visit the event website.

Tuesday, December 11, 2018
1:30 p.m. – 2:30 p.m. EST

During this webinar, Partner Anna T. Pinedo will provide an overview of the market trends that shaped the year, including an overview of the IPO market and notable trends, follow-on offerings, and other market developments.  In addition, she will discuss a number of the principal areas of focus for the SEC during 2018 that affect issuers, including the following:

  • Disclosure updates and simplification, the final rules and what’s to come;
  • Changes impacting executive compensation, including the Rule 701 amendment, the Concept Release on Rule 701 and Form S-8, and the focus on perk disclosures;
  • Cybersecurity guidance and disclosure and enforcement trends;
  • The amendments to the smaller reporting company definition;
  • Adoption of new accounting standards (revenue recognition and lease accounting); and
  • What to expect in 2019.

LexisNexis will provide CLE credit. For more information, or to register for this session, please visit the event website.

Thursday, December 6, 2018
1:00 p.m. – 2:00 p.m. EST

Any issuer eligible to register its securities on Form S-3 should consider setting up an ATM program in order to maximize its opportunity to raise just-in-time capital. Significant selling stockholders may also benefit from the flexibility of the ATM structure in order to take advantage of market opportunities to sell shares quickly. During this webinar, Counsel Brian D. Hirshberg and Raymond James’ Jeff Fordham will review the basics of ATMs, as well as some of the legal and regulatory considerations.

Topics will include:

  • Form S-3 eligibility for issuers;
  • SEC filing requirements; and
  • ATM offerings for a selling stockholder.

PLI will provide CLE credit. For more information, or to register, please visit the event website.

November 19–20, 2018

Location
PLI New York Center
1177 Avenue of the Americas (2nd Floor)
New York, NY 10036

Partner Anna T. Pinedo will serve as co-chair for this program and will participate in a panel discussion titled, “Investment Banking Basics: Fundamentals of Capital Structures” on Day One of the conference. Topics will include:

  • Common financing alternatives — debt, equity and hybrids;
  • Sources of funding — public and private markets;
  • Liquidity — raising and deploying capital;
  • Finding the Optimal Capital Structure; and
  • Current marketplace developments.

PLI will provide CLE credit. For more information, or to register, please visit the event website.

Wednesday, November 14, 2018
1:00 PM – 2:00 PM Eastern

During this webinar, we will explore the proposed Regulation Best Interest rule and related developments. Topics include:

  • Overview of the proposed regulation;
  • Principal areas of comment;
  • What we can anticipate in terms of timeline and process and what firms can do now;
  • FINRA’s proposed amendments to quantitative suitability; and
  • State fiduciary rules.

Wolters Kluwer will provide CLE credit. For more information, or to register for this session, please visit the event website.