Instarcart and Klaviyo both submitted to go public on Friday, trailing Arm's IPO filing earlier in the week. Each company has a unique narrative, and their performance in the public markets will help highlight the investor enthusiasm for fresh tech offerings. With numerous organizations poised to enter the market, the forthcoming IPOs will likely set the tone for the remainder of the year.Last week, tech investors heard the much-awaited three-letter acronym: IPO. After a 20-month dearth of venture-backed tech companies going public in the U.S., Instacart and Klaviyo submitted filings for their debuts, while chip designer Arm, owned by Japan's SoftBank, announced it plans to hit the Nasdaq. These offerings serve as a gauge of public market interest in new opportunities. Depending on how these companies fare, more may be emboldened to join in the fourth quarter.Lise Buyer of IPO consultancy Class V Group noted that 2021's record valuations for tech IPOs likely won't be seen again anytime soon. Instacart in particular has experienced a drastic slashing of its historic $39 billion valuation since early 2021, now standing at approximately $11 billion. That amount is slightly more than DoorDash's current market value of 3.8 times revenue. Klaviyo, on the other hand, has not had to reduce its $9.5 billion valuation since its 2021 fundraising.
Despite its lesser-known brand, Klaviyo has demonstrated remarkable growth compared to Instacart. The company's revenue in the second quarter rocketed by 50% to $164.6 million and netted a profit of $10.9million in the period, a significant improvement from nearly $12 million losses from the previous year. According to the Bessemer Cloud Index, which consists of around 70 publicly traded cloud companies, Klaviyo's growth rate is comparable to the top-performing companies, which have a revenue multiple of about 12 times. Backing up the company are Summit Partners, e-commerce software vendor Shopify, and venture firm Accel as investors.
Buyer suggests that companies are filing to go public now to capitalize on the back-to-school season. The 15-day waiting period after IPO filings should end in early September, with offering potential to follow two weeks later.
Given its size and past status as a public company, Arm's planned IPO could be quite different from the typical venture-backed companies. Owned by Masayoshi Son's SoftBank, the chip designer reported $524 million net income on $2.68 billion in revenue for fiscal 2023. Based on the expected market valuation of $32 billion, Arm's required multiple of earnings is around 61 times. Comparatively, other semiconductor companies like Nvidia and Qualcomm have significantly lower multiples.
The current tech sector is displaying signs of slowing growth, with the Nasdaq recording a 5.3% decline this month. Investors are reminded, however, that companies have to eventually commit to going public to prove themselves in the marketplace. To date, the most recent venture-backed IPOs in the U.S. were HashiCorp and Samsara in December 2021.
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