Navigating End-Of-Year IPOs 

By Jared Carmel

It’s no secret that the venture market has seen a decline in investment over the past few months and that many companies who were expected to go public have put those plans on hold.

But with the end of the fiscal year in sight, late-stage companies have spent the summer with an eye toward profitability and bulking up their balance sheets. Most often viewed through the lens of layoffs, we’ve seen startups reduce spending when it comes to sales, marketing and R&D and instead shift their energy toward existing products and subsequent profit to ensure they are going out with at least single-digit-positive profit.

What’s expected

With this renewed focus on sales, we shouldn’t be surprised to see a big shift in fundraising toward the end of September. Not only does September end the fiscal year across the Fed, but we’ll also start to see the impact of startup sales cycles coming out of the first half of the year.

Companies that may have intended to go public earlier this year can look to late September through the end of 2022 as potential openings. Some companies, such as Instacart, filed notice with the Securities and Exchange Commission over the summer, allowing them flexibility to use a traditional IPO, direct listing or even have some M&A ahead of going public.

As the pandemic and volatile economy has forced many startups to reevaluate their IPO strategies, investors have been doing similar reevaluation when it comes to funding.

Where investors may have previously focused on verticals, we’re anticipating a greater focus on “capital light” startups across industries in the coming months.

Profitability is coming to define a startup’s ability to go public, so companies that focus on creating marketplaces rather than pushing products, are going to see a lot less capital spend in comparison.

Jared Carmel is a managing partner and co-founder at Manhattan Venture Partners, a venture fund and research-driven merchant bank focused on the secondary market for late- stage, venture backed, tech companies.

Illustration: Dom Guzman

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