Tech group public-private funding gulf widens

LONDON: A chasm has opened between the private and public financing of fast-growing tech groups as more Silicon Valley companies shun initial public offerings, contributing to a sharp fall in global listings of all kinds.

Tech companies raised less than $10bn through IPOs in the US in 2015, according to Dealogic, compared with $41bn the year before, when the figure was boosted by the $25bn raised by Chinese ecommerce company Alibaba.

The dearth of IPOs has provoked consternation among venture capital investors in Silicon Valley, who have seen a hoped-for payday repeatedly deferred in recent years as companies such as Uber, Airbnb and Palantir have opted to stay private rather than follow earlier generations of successful start-ups to Wall Street.

“There’s some impatience around the fact that we need liquidity,” said Bill Maris, head of the venture capital arm at Alphabet, the holding company for Google. “Companies generally need to go public so there’s liquidity in the marketplace.

I think we’ll move in that direction, because I don’t know how much further the pendulum can swing in the direction it’s already gone.” With tech start-ups shunning Wall Street, the amount raised instead from venture capitalists in 2015 is expected to show its second-biggest year ever when official numbers are reported, topped only by the dotcom bubble year of 2000.

If the fourth quarter matches the year before, the amount of private investment would have exceeded $60bn, or more than six times as much as tech companies raised on Wall Street during the year – twice the differential that existed at the height of the dotcom boom. The flood of money into so-called “unicorns”, or private start-ups valued at $1bn or more, made it unnecessary to seek a listing, said Lise Buyer, an IPO adviser in Silicon Valley.

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