Image Credit: Harrison Weber for VentureBeat
This year may have seen an increase in IPOs from 2016 (123 so far in 2017 vs. 105 all of last year), but the number of companies going public today is well below the average of 222 IPOs per year we saw in the U.S. between 2013 and 2015. Will 2018 be just another “slow year”? The reality is that the IPO market is slowly going away; startups have been staying private longer and raising capital in the private markets. Fewer and fewer firms are going public — for excellent reasons.
To understand my rationale, let’s briefly consider the origins of the U.S. stock market. In the late 1700’s, businessmen began meeting along a “wall” originally built by the Dutch in lower Manhattan. These people meeting on what would later be aptly named Wall Street traded government bonds and then eventually traded in the ownership of companies. At the time, Wall Street created an important value in any market — transferability and liquidity of something you owned.
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