Saturday, November 28, 2015

The Last 90 VC-Backed Tech IPOs Have Dramatically Underperformed the Market (all in one chart)

From CB Insights:

How 90 Recent VC-Backed Tech IPOs Have Performed In One Chart
 Dollars - Bruised 100 cropped
Despite winners like Facebook and ServiceNow, US VC-backed tech IPOs from the past three years are significantly underperforming the S&P. 
The rise of mega-rounds or “private IPOs,” i.e. startups raising hundreds of millions of dollars at high valuations while still private, has led to speculation that all the returns will have been squeezed out of these companies before they go public.

That prompted us to look at how tech IPOs have performed in recent years. The answer is … not good.

We looked at all US VC-backed tech IPOs since Facebook‘s May 2012 public offering through October 2015 and found that the return was a lowly 7.05% over that time period (assuming you invested in all these companies on the first day of trading’s closing price, and invested the same amount in each stock).

For context, the S&P 500 return was 60.5% over that same time period, while the Dow Jones Industrial Average returned 42.8%.

An equal weight S&P 500 ETF (RSP), which is a better equivalent for our theoretical tech IPO investments, since it assumes an equal investment into each S&P 500 component, is up even more over the same time period: 67%....MORE