The dominance of companies like Amazon, Microsoft and Facebook combined with the unwillingness of startups to deal with ‘the hassle’ of public investment is shaping the tech IPO market, according to a veteran researcher.
“There’s a lot of capital in the pre-IPO market,” BDC IT Venture Fund partner Peter Misek told BNN in an interview on Monday.
“If you’re Uber, if you’re Airbnb, you’re these large companies; dealing with the public markets and some of the ‘hedge fund posse’ (as) I call them, is a real pain… So if you don’t need them, (if) you don’t need their capital, you don’t need the hassle: Why would you take it?”
The companies that do want to test the IPO market, meanwhile, are bound to be swallowed up by the small collection of technological giants currently dominating the market.
“You typically have a few (of) what I would call platform or anchor companies. [It] will be very difficult to come up with another one,” Misek said.
“I would argue that you’re going to see probably 10-to-20 IPOs over the next two-to-three years in the tech sector and that the vast majority of them - if they are successful - are going to be acquired. It’s very likely that Facebook, Amazon, Microsoft and Alphabet are the key acquirers.”
Misek sees the dominance of a few companies as a natural progression in the tech sector, noting that at least the current market is dominated by a collection of companies as opposed to Microsoft’s prior ‘monopoly’.
“Every time there’s a generational or technological shift, there’s an opportunity for a new oligopoly and we’re coming close to one,” Misek said.
“Microsoft was frankly its own monopoly, not even an oligopoly. Now you at least have three or four players fighting for it.”