20 venture-backed tech exits to watch in 2023

News Analysis 4 January

20 venture-backed tech exits to watch in 2023

After the worst year for initial public offerings in decades, technology companies are expected to face many of the same challenges in the first half of 2023. Rising interest rates and falling valuations should keep many venture-backed tech companies on the sidelines until market conditions improve.

The IPO market could open back up in the second half of the year if interest rates stabilize, but even then, advisors say companies will need to recalibrate their business models to improve their unit economics to find success on the exchanges. A path to profitability and predictable, recurring revenue are among the attributes public investors will want to see before they back emerging technologies. 

The perilous stock markets will compel many startups to seek additional venture capital. But private financings have become more onerous as well, and companies that cannot secure the cash they need at the valuations they want will look to sell to strategics or private equity firms in this buyers’ market. 

When the dust settles, there will be winners, losers and a landscape that no doubt looks different than today. Here are 20 venture-backed tech companies that we think could find exits in the year ahead.

Arctic Wolf

In an interview with this news service in February 2020, the company’s then-top executive said Arctic Wolf could be ready for an IPO toward the end of 2022. The Eden Prairie, Minnesota-based cybersecurity company was on track to hit cash flow breakeven by then, he said, and it had been making investments to help it operate like a public company. Arctic Wolf fetched a USD 4.3bn valuation when it raised USD 150m in Series F financing in July 2021, and last fall, it secured more than USD 400m in convertible notes led by Owl Rock. With cybersecurity receiving heightened attention recently, Arctic Wolf could go public in 2023 or seek a sale in this rapidly consolidating market.

ARM

UK Prime Minister Rishi Sunak recently pitched ARM and owner SoftBank Group on the merits of listing on the London Stock Exchange, this news service reported in December. Executives at the British semiconductor and software design company, however, favor the Nasdaq, where they believe the company’s valuation can reach its full potential. ARM is targeting a valuation between USD 20bn and USD 30bn in a listing that could come in September, according to sources familiar with ARM’s strategy.

BitTitan

IT and managed services automation provider BitTitan may look to go public this year. Co-founder, owner and CEO Geeman Yip told Mergermarket in May 2021 that it could go public anytime within the next 24 months, noting market dynamics were the most important timing consideration. At the time, the Bellevue, Washington-based company had been approached by the Australian Securities Exchange and was weighing listings in other venues too. Yip noted that BitTitan had been approached with buyout offers from strategics and PE firms and would consider a sale if a buyer can help it scale.

CB Insights

The New York-based market intelligence platform was starting to evaluate several growth options, including a public debut, co-founder CEO Anand Sanwal told Mergermarket in late 2021. CB Insights expected to generate around USD 100m in annual recurring revenue in 2022, a common threshold companies consider when thinking about a public debut. It had received buyout interest from strategics and PEs, but hadn’t entertained conversations, the CEO said at the time.

Chime

The San Francisco-based digital bank reportedly hired Goldman Sachs to assist in IPO preparations a year ago. The market has seen a lot of changes since then, but Chime is staying on the offensive, reportedly bidding as much as USD 2bn on pay service firm DailyPay in December, albeit unsuccessfully. If the company is going to make big moves, it may also want unfettered access to the public markets.

CloudBees

The San Jose, California-based DevOps firm has had three CEOs over the last three years, but its ambition to go public remains constant. In June 2020, a CloudBees executive told this news service an IPO was about two years away. CloudBees’ newest CEO, Anuj Kapur, has said an IPO is still possible. His public company experience from his days as a C-level exec at Cisco and SAP will serve CloudBees well if it pursues a listing or elects to sell itself to a larger entity in the increasingly competitive DevOps space. 

Crexi

Commercial real estate technology platform Crexi was planning to go public in 2023 or early 2024, CEO Mike DeGiorgio told this news service in June 2021. At that time, the Los Angeles-based company rebuffed several SPAC approaches so that it could operate internally as if it were a public company for a year to prove its readiness. Crexi expected to generate tens of millions of dollars in revenue in 2021 at a growth rate between 150% and 200%, DeGiorgio said. It would consider buyout offers too, he added.

Cybereason

After confidentially filing for an IPO a year ago, the Boston-based cybersecurity company abandoned that plan last fall and reportedly mandated JP Morgan to search for a buyer. Cybereason, recently valued at USD 2.5bn, competes with incumbents McAfee and Symantec in endpoint security protection.

Databricks

The San Francisco-based data warehouse and AI company has been flirting with the public markets for a couple of years. Volatility on the exchanges has kept it on the sidelines, this news service previously reported, but if the IPO market opens this year, Databricks could take the plunge. It last raised USD 1.6bn at a USD 38bn valuation led by Morgan Stanley’s Counterpoint Global in 2021. 

ezCater

In December 2021, the Boston-based online catering marketplace raised USD 100m in a late-stage investment round led by SoftBank Vision Fund 2 at a USD 1.6bn valuation. Executives have publicly discussed an IPO over the last couple of years. Co-founder and CEO Stefania Mallett and co-founder and Chief Strategy Officer Briscoe Rodgers have also previously sold companies they launched. Whether it is an IPO or a company sale, a liquidity event could be on the menu for ezCater in 2023.

Flexport

Supply chains were thrust into the spotlight after they saw serious disruptions during the coronavirus pandemic. Flexport’s supply chain management technology and its end-to-end shipping solutions have become integral components in the global freight industry. The San Francisco-based company was projecting USD 5bn in revenue in 2022, up from USD 3.3bn in 2021, providing a solid growth story for investors. Flexport raised USD 935m in Series E financing a year ago, and an IPO is a logical next step.

Gupshup

The San Francisco-based conversational business messaging platform will be ready to go public when market conditions are conducive, co-founder and CEO Beerud Sheth told this news service in December. Gupshup was expecting 2022 run rate revenue of about USD 250m, Sheth said, and its EBITDA slipped to “slightly below double digits” from double digits a year earlier. The CEO said the company could raise a couple of hundred million dollars in private capital before a public listing, while noting that IPO and pre-IPO rounds “are often related and we’ll look at doing either or both when markets open up.” 

Instacart

The online grocery delivery service confidentially filed for an IPO in May 2022 before putting the plan on ice amid market volatility. Last month, the San Francisco-based firm slashed its valuation to USD 10bn after reaching a high of USD 39bn in 2021. Instacart is a household name nonetheless and appears destined to go public. But if it doesn’t, might a major retailer or transit company swoop in to make it its own?

Netskope

The Santa Clara, California-based cybersecurity firm has raised USD 1bn since it was founded a decade ago. After it secured USD 300m in July 2021, CEO Sanjay Beri said an IPO was on the horizon. To enhance its zero-trust and edge-security capabilities, Netskope acquired device security startup Wootcloud in June 2022 and cloud networking vendor Infiot that August. With work-from-anywhere and cloud-transformation trends here to stay, Netskope is both an attractive IPO and M&A prospect. Alphabet [NASDAQ:GOOGL], Cisco [NASDAQ:CSCO], CrowdStrike [NASDAQ:CRWD], McAfee, Palo Alto Networks [NASDAQ:PANW], Proofpoint and Zscaler [NASDAQ:ZS] are active acquirers in the space.

Policygenius

CEO Jennifer Fitzgerald said last May that “everything is on the table” regarding a possible exit for the consumer insurance marketplace. The company wants to have scale, profitability and a predictable performance for six to eight quarters before considering a stock market debut, Fitzgerald said. “Our sentiment, and the broader sentiment among late-stage private CEOs that I speak to, is wait out this volatility and see where the market lands,” she said. Policygenius, which has dual headquarters in New York City and Durham, North Carolina, announced a USD 125m Series E round in March 2022.

Reddit

In late 2021, the San Francisco-based social media and aggregation website retained Goldman Sachs and Morgan Stanley to advise on an IPO at a USD 15bn valuation. Reddit hasn’t updated its IPO timeline since then, but it has made at least three acquisitions, including one in September, to strengthen its platform. With 50 million daily active users, Reddit could be among this year’s blockbuster IPOs.

Rubrik

In December, the Palo Alto, California-based data management firm appointed former Microsoft chairman and Symantec CEO John Thompson as the lead independent director of its board. Thompson, who also chairs Illumina’s [NASDAQ:ILMN] board, said he wants to help Rubrik scale and prepare for an IPO. His industry connections would be welcome should the company pursue a sale instead. There is no shortage of potential buyers, including Microsoft [NASDAQ:MSFT], which made an equity investment in Rubrik in August 2021. 

SingleStore

The San Francisco-based real-time database platform expected to be IPO-ready in six to nine months from a compliance and revenue perspective, CEO Raj Verma told this news service last February. At the time, it was in talks with three leading banks and was “in the throes of getting advice on IPO preparedness,” Verma said, pointing to 2H23 as a likely timeline. He also called out a “50-50 chance” SingleStore would raise another private round before going public. Seven months later, the company announced it closed a USD 146m Series F-2 round led by Goldman Sachs Asset Management, meaning it could be poised to take advantage when the IPO market reopens.

Stripe

A powerhouse in payment processing, Stripe could be the company to turn the IPO market around. For years, advisors and investors have been eagerly awaiting a listing from the Irish fintech firm, and this may finally be the year to do it. With stock options for its early employees set to expire in 2023, Stripe finds itself in a comparable situation to Airbnb [NASDAQ:ABNB] a few years ago. Early employees will face a steep tax bill if they exercise their options, and Stripe will need to either go public or orchestrate a secondary offering to provide them liquidity. Airbnb opted for an IPO to take care of its most loyal staff. Over the summer, Stripe trimmed its valuation from USD 95bn to USD 74bn and reduced its workforce by 14%. If it can maintain its current valuation, Stripe would be much larger than many publicly traded peers, such as Block [NYSE:SQ] and Adyen [Euronext:ADYEN].

TripActions

The business travel and spend management firm could look at raising a pre-IPO round or make a public debut in the coming months, CFO Thomas Tuchscherer told this news service in June — four months before it raised USD 154m in equity at a USD 9.2bn valuation. The Palo Alto, California-based company’s path will depend on market conditions, and it has plenty of runway with its current capital to remove any sense of urgency, Tuchscherer noted. TripActions confidentially registered for an IPO in September, Israeli newspaper Calcalist reported, and it appears poised to test the public markets in 2023.

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