According to findings published by CB Insights in early 2015, tech companies are staying private longer before taking the bold step of making an initial public offering, or IPO. This is due in part to the fact that investors are showing more interest in coming on during the late stage.
The research analyzed trends in late-stage tech deals from 2010 through 2014. In 2010, investors and entrepreneurs negotiated approximately 70 "mega financings," defined as deals involving investments of $100 million or more. Four years later, investors and entrepreneurs participated in over 300 mega financings. Interestingly, venture capital was not the sole or even the primary source of mega financing investment funds. Instead, these late-stage deals consisted primarily of hedge funds, mutual funds, and other investments commonly used to round out and bolster portfolios.
According to the research, the benefits of late-stage investments to both entrepreneurs and investors seem clear. Investors have the opportunity to deal with companies that have solidified their business plans, management team, and products. Meanwhile, entrepreneurs can reap the rewards of their hard work by attracting private investments that leave their companies well-positioned for eventual IPOs.