Many Canadian technology startups are postponing their initial public offerings, due to reduced pressure from their initial investors and the abundance of financing available through venture capital funds. Canadian companies are now encouraged to wait to go public until their valuations exceed $500 million. This trend is also seen across the United States. In 2014, many US technology companies also delayed their IPOs, going public after an average of 11 years. This is a significant difference from the previous tech boom – in 2000, technology companies became publicly traded after an average of only six years of operations and valuations of $200 million.
Although enabling founders to build stronger businesses, delaying public offerings is not entirely without risk. By choosing late-stage funding rounds over public offerings, the likelihood of overvaluation for tech companies grows. Investors cannot guarantee that the public market will value the company as highly as their private valuation, leading to losses on their investments.
To read the Financial Post article on Canadian IPOs, click here