Last week, Pitchbook published its IPO Watchlist of 10 US fintech venture-backed with a high likelihood of going public.
According to the article,
The list was created using PitchBook’s VC Exit Predictor, which calculates exit probability using a machine learning model that is fed historic and real-time data on private company exits. The predictor draws from 34 inputs related to company characteristics, financing and investors.
Pitchbook IPO Watchlist
Pitchbook’s algorithm identified the following companies as the most likely to go public:
| Company | IPO Probability | Capital Raised | Last Est. Valuation | Last Est. Revenue | LI 2-yr change in EEs |
|---|---|---|---|---|---|
| Stripe | 97% | $9.1B | $50B | $14B | 24% |
| Rippling | 94% | $705M | $11.8B | $230M | 164% |
| Tradeshift | 94% | $880M | $2.7B | $119M | -24% |
| Socure | 92% | $774M | $4.5B | $75M | -13% |
| Bolt | 91% | $957M | $11B | ? | -16% |
| SpotOn | 91% | 900M | $3.6B | ? | +15% |
| Addepar | 86% | $495M | $2.2B | $150M | +41% |
| Gusto | 86% | $516M | $9.6B | $500M | +17% |
| Navan | 86% | $2B | $9.2B | $300M | +60% |
| Plaid | 48% | $734M | $13.4B | $350M | +70% |
Note that in the table above, the first four columns of data are from the PitchBook article. The IPO probability is from the aforementioned VC Exit Predictor. I added the last two columns. They are:
- Revenue estimates are based on a simple Google search. (I only provided an estimate when Google found the right company, and the estimates seemed to be consistent.)
- The last column is the change in the company’s number of employees on LinkedIn over the past two years.
Create $1 Billion in Value or Raise it?
These fintech unicorns raised at least $500 million, often $1 billion or more. When Aileen Lee coined the term “unicorns” 10 years ago, I bet she was thinking of companies that had reached a valuation of $1 billion by creating a ton of value, not by raising $1 billion!
Indeed, Aileen Lee published a good article on the past ten years of unicorns and noted how much less capital-efficient today’s enterprise unicorns are relative to back then. This chart captures the effect:
As Ms. Lee notes, even the 7x valuation to equity raise ratio for enterprises in 2023 is inflated due to the overvaluations that persist in some of these companies. In many cases, their last known valuation was during the period of peak valuation.
Probabilities of IPO
According to the Pitchbook IPO Watchlist, all but one of the companies have an 86%-plus chance of having an IPO. Wow, that seems high. I cannot name too many things with an 86% chance of happening other than an insane presidential election and the White Sox failing to win the World Series.
Stripe, Rippling, and–Tradeshift?
Stripe, Rippling, and Tradeshift, in particular, have a 94%-plus probability of going public, according to Pitchbook. Umm, with all due respect to the 34 variables in the algorithm, no.
- A lot has been written about Stripe. Its financials are reasonably well-known, and we have Adyen as a comparable. This seems like a good bet.
- Rippling seems to be growing like a weed; there’s a fair bit written about it, and like Gusto, it competes in the payroll space, which has created quite a few unicorns. On the other hand, Rippling was founded by the founder of Zenefits, which sported a $4.5 billion valuation before imploding, so who knows?
- Tradeshift, on the other hand, has always been, as Churchill said, a “riddle wrapped in a mystery inside an enigma.”
- There has not been a lot written about it, and most of the financials provided by the company were in the form of percentages.
- The web’s revenue estimate for Tradeshift is around $100 million, and there is no clear sign of growth in the various projections. Based on LinkedIn’s employee numbers, it could even be shrinking.
- The company has raised capital, representing 7x its revenue. Who knows what the value is now?
- Articles a few years back about loans from Greensill and other irregularities were a cause for concern.
- And, of course, the Fall 2023 firing of the former CEO and founder under a cloud of lurid allegations, which the CEO denies, adds to the uncertainty. (I’m going to make you Google that stuff, sorry.)
As the great Sesame Street strong says, “One of these things is not like the others.”
My Prediction
I will go out on a limb here and say there is a 94% chance that Tradeshift will not go public in 2024. It’s me against the Pitchbook algorithm. Take your pick.
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