Why I’m excited by the growth stage technology market
It’s no secret that the investment life cycle for pre-IPO companies has gotten significantly longer over the past decade. The added expense (via Sarbanes-Oxley) and increased scrutiny of companies going public has meant that tech startups are taking longer and longer to go public.
This is precipitated in part by the availability of liquidity solutions for the founders, including secondary exchanges like Sharespost, and late stage ventures funds which are offering liquidity solutions to key employees, Dan Burstein’s Millennium Technology Value Partners and Yuri Milners DST come to mind, but there are several others as well.
I believe that over the next year or two, we’ll start seeing that fruits of these efforts and many very successful startups will begin to take the plunge. This will make for very attractive IPOs, which in turn, means highly exciting growth stage investments today.
If I were evaluating among growth stage opportunities today I’d look for the following characteristics:
- leader in their field
- industry growth/huge market
- definite financial/revenue projections
- virality and network effects —> creation of sustainable barriers-to-entry
- innovative aspect
Notwithstanding valuations, which according to people in the know are exceptionally high (more here), I find the following companies to be the most exciting pre-IPO companies today:
- Warby Parker
- WhatsApp Messenger
- One Kings Lane
Yes, some of these companies sound like obvious picks, and that’s because at this late stage of the game the winners begin to emerge from among the pile of contenders.
What are your thoughts? Would you include any other startups in this mix?