This Year’s Startup IPOs Have A Very Mixed Track Record

We often discuss the IPO market in binary terms. The window for new offerings is open, or it’s shut. Big exits are happening, or they’re not.

This year, such rigid nomenclatures haven’t applied. Rather, market debuts have worked out well for some, horribly for others, and sort of “meh” for many more. There’s no obvious hot sector, and early pops can be short-lived.

That was the broad takeaway from a perusal of venture-backed American companies that carried out market debuts this year. While it’s a small class — just around 14 at initial valuations of $100 million or more — their performance is as varied as it gets.

Winners and losers

This includes some big winners as well as losers. In the winner camp, Mediterranean dining chain Cava Group has done especially well, with a market cap hovering around $5 billion. So has Oddity Tech, an online makeup brand valued around $2.4 billion.

On the losing side, meanwhile, an obvious standout is mortgage platform Better. The New York-based company saw shares nosedive 93% last Thursday in the first day of trading following its merger with a special-purpose acquisition company.

Several others that completed SPAC mergers this year have also performed poorly. This includes Intuitive Machines, a commercial lunar lander company; Nuburu, a developer of industrial blue laser technology; and Near, a data intelligence provider. All are down more than 90%.

To get a sense of the mixed performance we’ve seen on the new offerings market this year, we listed 14 companies with 2023 debuts below. The list compares initial valuations with recent ones:

Public investors want profits

Post-offering performance sheds some light on what public investors want. Clearly, profitability is a major item on their wish lists. Cava, for instance, just reported its first profitable quarter. Oddity has been profitable for a couple years. And Nextracker, a provider of solar trackers and software, also makes money and has done well since its February IPO.

The market’s embrace of profitable brands bodes well for the three big offerings coming later this year: Arm Holdings, Instacart, and Klaviyo.

Of those, Arm is by far the most profitable, with net income of more than half a billion dollars in its most recent fiscal year. The company is eyeing an initial valuation in the range of $60 billion to $70 billion.

Instacart, meanwhile, has managed to turn a profit from its grocery delivery business for five consecutive quarters. And Boston-based Klaviyo, a marketing and data automation startup, boasts both positive net income and sharply growing revenues.

Given the historically slow pace of startup IPOs over the past several quarters, it’s refreshing to see things picking up again. And while markets might not be ready to embrace the classic, money-losing growth startup, for those operating in the black, the window looks to be opening.