The fascinating case of and its hard-to-nail-down-valuation continued this morning, with the recently-public direct-to-consumer teeth-straightening startup losing another 1.4 percent of its value as of the time of writing. The company shed around 12 percent yesterday, making today’s losses appear modest in comparison.

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The unicorn is worth $3.68 billion today, a fraction of its IPO valuation set in earlier this year when the firm was worth $23 per share and . Today, SmileDirect is worth $9.56 per share.

When we last checked in SmileDirectClub’s falling market valuation it was worth $3.94 billion. At that time I wasn’t convinced that it had too much further to fall. After all, the company had an entire year since its final private round to grow, surely it had added a good-sized chunk of value during that period; especially as it raised about a year ago, and therefore had plenty of capital to put to work.

But, no, since that small article the Nashville-based company has shed about a quarter billion dollars in value.

The SmileDirectClub saga could be viewed through the lens of private and public valuations, and the occasional disconnect between them. For example, if SmileDirectClub was , it was probably not worth $8.9 billion a year later when it went public.

Rare is the company that can nearly treble in value in a four-quarter period. But since the IPO, the stock market has bid down the company’s valuation so sharply that it could be argued that the company is fairly valued now, and was therefore overvalued a year ago during its final private round.

If this is all a bit frustrating, I understand. During a period when companies are accreting lots of putative value, nailing down a fair market price can be a topsy-turvy process. But, undergirding the confusion around the value of certain assets is the fact that we’re constantly valuing unprofitable companies. That makes putting a price on them harder than, say, a profitable company.

Traditional valuation methods, like valuing a company on a multiple of its profit, don’t work with so many unprofitable companies going public this year. And, with many of them sporting huge, and complex businesses ( is a great example of this), valuing them is hard. This is at least partially how the private markets have gotten some companies very wrong this year (Uber, , SmileDirectClub, , etc.).

We’ve joked this year that “No One Knows What Anything Is Worth,” a post that we followed up with a lighthearted “No One Knows What Anything Is Worth, Part II.” Perhaps we shouldn’t have been joking.

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When was going public, things looked great for the at-home, teeth-straightening company. After raising , SmileDirect’s IPO pricing cycle went terrifically. The company initially set a $19 to $22 per-share IPO price range before selling nearly 60 million shares at $23 apiece.

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The new per-share price valued SmileDirectClub at around $8.9 billion. For the Nashville-based company, that new valuation was rich and welcome. By pricing where it did, SmileDirect raised over $1 billion with minimal dilution, at least compared to what it would have cost the firm to raise the same sum at its old valuation.

That prior valuation was a fraction of the firm’s IPO worth. Indeed, when SmileDirectClub last raised known private capital, (just one year ago), investors valued it at a smidge under $3.2 billion after counting the value of the $380 million infusion.

Given that the company managed to squeeze a 178 percent gain in value in under a year when it went public, perhaps we should have better forecasted what came next.

Namely this:

As we reported at the time, SmileDirectClub’s shares were instantly spat out by the public markets, closing at $16.67 on their first day of trading, a 28 percent decline.

Today the company is worth just over $10 per share, off 55.5 percent from their IPO price ahead of trading today. That’s a stunning repudiation, bringing the company to a somewhat embarrassing private-public value inversion. SmileDirect is in danger of seeing its public valuation fall under its final private valuation:

• Final SmileDirectClub private valuation: .
• Current SmileDirectClub public valuation: $3.94 billion.

It’s not there ����,��but the value of SmileDirectClub today is a shadow of what it was when its bankers got its IPO put together. (Oddly, this result is an endorsement of sorts for the traditional method of determining the value of a company. If SmileDirect had been valued fairly, it would have raised far less capital in its debut.)

One last thing before we go. If you observe the above chart, there are two lines. The orange line corresponds to the far-right axis. It’s SmileDirect’s trailing price/sales ratio. More simply it gives us a good idea of how investors are valuing the company’s top line.

As you can see, early in its life as a public company, even down from its IPO price, SmileDirectClub was able to garner a double-digit revenue multiple. Calculated on a forward basis that metric would shrink some, but a better question is why the firm was valued at over 10x revenue to begin with?

In retrospect, SmileDirect has all the things that public-market investors seem tired of:

• Dual-class share structure.
• Scaling losses as the firm grew.
• A recent sales and marketing expense boom.
• Majority non-recurring revenue.

To its credit, SmileDirectClub had rapidly scaling revenue (from $175.1 million in H1 2018 to $373.5 million in H1 2019), and strong gross margins (around 78 percent in H1 2019). Those two highlights weren’t enough to sustain a nearly $9 billion valuation.

We’re keeping an eye on SmileDirect, and will report if it does dip below its final private price. Sadly the company doesn’t report earnings until November 12th, so we still have a while to wait for new numbers.

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But those developments are not reflected in funding numbers for the just-ended quarter. Crunchbase data shows that investment in U.S. and Canadian startups was still rolling along at historically high levels in Q3.

Overall, investors put $36.16 billion to work across all stages in the third quarter, according to projected totals for North American startups. That’s up a bit from Q2 and a median performance relative to the past five quarters.

Deal counts were up, too. In the just-ended quarter, Crunchbase projects that investors backed a total of 3,563 funding rounds, the highest tally in five quarters, by a smidgen. A pickup in deal-making at the angel and seed stage boosted the Q3 totals.

It was also a strong quarter for exits, albeit with several instances of some weak aftermarket IPO performance. More than 20 private, venture-backed companies carried out public offerings (our running list of 2019 IPOs is here). M&A was also not bad, with a number of deals .

Below, we chart and analyze the numbers in more detail, focusing on investment totals, deal counts, stage-by-stage dealmaking, and exits.

Total Funding And Round Counts

First, we’ll look at funding totals for the quarter. The chart below tallies up investment across all stages, from seed through technology growth.

As you can see, no slowdown here, at least looking at the overall numbers. The chart does show a decline in early stage investment, which could be a worrisome sign. More on that as we look at stage-by-stage trends.

Next, let’s take a peek at round counts in the chart below:

The broad takeaway here is that round count totals were comparatively high in Q3, with a rise in seed-stage financings compensating for a dip in early-stage dealmaking. Now, let’s take a closer look at what’s happening at each stage.

Seed

It all starts at seed stage, so we’ll begin here. The big picture: Seed deals got bigger on average from year-ago levels, and there were more of them.

Investors put $1.92 billion into seed-stage deals in Q3, per Crunchbase projections. That’s up sharply from Q2 and the highest total in five quarters. Projected seed funding deal counts were up as well in Q3, with the total expected to slightly exceed 2,200.

One of the factors behind the rise in seed funding totals is an increase in what Crunchbase calls “supergiant seed rounds,” or seed deals of $5 million or more. Rounds of this size used to be a rarity, but have become much more common in the past couple of years.

Early Stage

Early-stage dealmaking (Series A and B) was less robust in Q3 compared to other recent quarters.

Overall, startups raised $11.5 billion in early-stage funding in Q3. That’s about on par with year-ago levels, but represents a drop of 14 percent from Q2 totals.

Round counts, meanwhile, showed deeper contraction. A total of 1,045 companies are projected to close a Series A or B round in Q3—the lowest level in five quarters. In all, third quarter round counts are down around 12 percent from Q2 and year-ago levels.

In the charts below, we look at both round counts and investment totals for early-stage over the past five quarters:

At the moment, it’s unclear what drove the decline in early-stage investment and deal counts. There’s a lot of money sloshing around the venture space, so it’s likely not about capital shortages and more about investors not finding as many candidates that they wanted to back.

That said, there were plenty of really large early-stage rounds in Q3, for companies in a broad range of industries. We list a few of the largest below:

Late Stage

While we saw some faltering in early-stage funding in Q3, late-stage held strong.

North American companies raised $20.9 billion in late stage rounds (Series C and beyond) over the course of the quarter. That’s a rise of 14 percent from Q2 and up 11 percent from the same period last year.

Round counts totaled 282 – about average for the past five quarters, with median round size flat.

A few really large later-stage rounds played a big role in boosting the quarterly totals. Below, we look at some of the largest Q3 funding recipients in North America:

Technology Growth

Technology growth is the most volatile category Crunchbase tracks, as there are few deals at this stage and they occasionally are huge enough that a single deal moves the quarterly totals.

For Q3, tech growth deals brought in $1.83 billion across 24 rounds.

IPOs

So, enough about money going into startups. What about companies actually providing some returns?

Turns out, the third quarter was a pretty good one in terms of venture-backed tech and healthcare companies making it to market. At least 21 such companies carried out IPOs in Q3 ().

Aftermarket performance, however, was more up-and-down, with some high-buzz companies seeing share prices fall sharply following their debuts, while others held on to gains.

Software unicorns, including and , confirmed there’s still plenty of demand from public investors for high-growth software plays. Disappointing debuts by high-end fitness startup and teeth-straightening provider indicated investors have less appetite for sustaining sky-high valuations in other sectors.

In the chart below, we look at five of the largest venture-backed IPOs of the quarter, based on capital raised.

M&A

Now, onto M&A. While acquisitions don’t provide as much buzz as a blockbuster IPO, they do account for a majority of startup exits.

Since many acquisitions are of undisclosed size, it’s difficult to gauge the returns they’re generating. However, we can look at the handful of large M&A deals for the quarters as at least a partial indicator of what acquirers are willing to pay a lot to buy.

With that in mind, the chart below looks at five of the largest disclosed-price M&A deals of the quarter involving venture-backed tech and biotech companies:

The Big Picture

The Q3 numbers, overall, point to a pretty strong funding environment. However, there is reason for greater concern than the numbers might seem to warrant.

That’s because a lot of warning signs for the startup and unicorn space cropped up towards the end of the quarter. These include the WeWork IPO drama, disappointing Peloton and SmileDirectClub debuts, and a growing sentiment that private investors may have overshot in valuations assigned to high-growth companies outside the software space.

As 2019 enters its final quarter, the exuberance that defined the unicorn space for most of the year is leveling down some. We’re not saying the party’s over, but it might be winding down a bit.

Methodology

The data contained in this report comes directly from Crunchbase, and in two varieties: projected data and reported data.

Crunchbase uses projections for global and U.S. trend analysis. Projections are based on historical patterns in late reporting, which are most pronounced at the earliest stages of venture activity. Using projected data helps prevent undercounting or reporting skewed trends that only correct over time. All projected values are noted accordingly.

Certain metrics, like mean and median reported round sizes, were generated using only reported data. Unlike with projected data, Crunchbase calculates these kinds of metrics based only on the data it currently has. Just like with projected data, reported data will be properly indicated.

Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to US dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs, and other financial events as reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.

Glossary of Funding Terms

• Seed/Angel include financings that are classified as a seed or angel, including accelerator fundings and equity crowdfunding below $5 million.
• Early stage venture include financings that are classified as a Series A or B, venture rounds without a designated series that are below $15M, and equity crowdfunding above $5 million.
• Late stage venture include financings that are classified as a Series C+ and venture rounds greater than $15M.
• Technology Growth include private equity investments with participation from venture investors.

Illustration:

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Let’s dive in and see where they’re at.

Most recently, Datadog and Ping went public this week. Pricing above and at the midpoint of their respective ranges, they both saw their stocks surge on their first day of trading.

New York-based Datadog started trading on the public markets on Thursday after setting its price at $27 per share on Wednesday. The company’s stock opened at $40.35, nearly 50 percent higher than the price it set. Datadog’s stock closed at $37.55 on its first day of trading.

Denver’s Ping Identity closed its first day of trading Thursday at $20.11 after pricing on Wednesday at $15 per share. Its stock opened at $18.75, 25 percent higher than where it priced.

At first blush, this is the ideal outcome for tech companies and their private market counterparts. The public market has, at least for now, proven to have an exceptional appetite for companies that are growing fast. Yet the significant pops over also signal that quite a bit of money has been left on the table. But the alternative, which is pricing too high, certainly comes with a touch more embarrassment, as SmileDirectClub has found out.

The Nashville-based DIY teeth straightening company priced its shares at $23 apiece before it started trading publicly last week. Its stock closed 28 percent below its price on its first day of trading and still hasn’t hit the $23 per share price the company thought it was worth. SmileDirectClub’s stock closed at $18.64 per share on Thursday.

Cloudflare’s had a pretty good near-week on the public markets so far. The company priced its shares at $15 apiece and opened at $18 per share on its first day of trading last week. Cloudflare’s stock was trading at $18.75 at the close of markets on Thursday.

We’ll continue to track late-stage companies’ IPOs as they come (Peloton next week!)

Illustration Credit:

Yesterday a few things happened that are worth noting. First, raised its IPO price range, and priced its IPO above range.

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In the first case, Cloudflare raised its range by $2, from $10 to $12 per share to $12 to $14 per share. This pushed the content delivery and Internet security company’s maximum valuation to $4.2 billion, about $1 billion higher than where the company was by private investors. And SmileDirect priced at $23 per share, $1 over its $19 to $22 per-share price interval. This pushed the value of the teledentistry company to nearly $9 billion.

Both signs are nice and bullish at a time when a well-scrutinized IPO is sinking before the market’s eyes. issues (more here�����Ի� here) do not appear to be shaking sentiment among public investors for companies that are both growing (WeWork is good at growth) and have some sort of path to profitability (WeWork is less strong in this category).

And the path to profitability can even be rather loose. Cloudflare’s operating and net losses rose in H1 2019 compared to H1 2018, but the company’s revenue growth acceleration and falling losses as a percent of top line seem to be enough. And in the case of SmileDirect, the firm’s operating losses improved in the first half of 2019 over its H1 2018 results, but on a net basis it actually did a bit worse. However, each seems to be sufficient for the companies to go public following a positive pricing dance.

It will be interesting to see if next week’s IPOs, and (more on their initial pricing ranges here), can keep up the momentum. If that does happen, it’s hard to imagine a more public rebuke of WeWork’s model. Four companies, all unprofitable, go public precisely as your IPO sees valuation cut after valuation cut.

More when SmileDirect begins to trade.

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The Nashville-based startup, which will list on the Nasdaq exchange under the ticker “SDC,” raised $1.3 billion by selling more than 58.5 million shares (a number that could rise to 67.3 million shares if its underwriters exercise their option).

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SmileDirectClub makes oral inserts for individuals looking to straighten their teeth at home, claiming its products cost customers around 60 percent less than braces. Traditional metal braces typically cost between $3,000 and $7,000, , while braces cost between $4,000 and $7,400.

SmileDirectClub, in contrast, charges a $1,895 single payment for its at-home teeth straightening kit, or $85 per month for 24 months and a $250 deposit for a total of $2,290. The model has found wide investor interest, with SmileDirectClub raising $439.5 million in total funding while private , with notable investors like and ,

SmileDirect said last week that it intended to price its shares between $19 and $22. With the pricing of $23 per share, the company is now valued at $8.9 billion.

SmileDirectClub last had a private valuation of $3.18 billion, according to Crunchbase.

, the company reported that its H1 2019 revenue was $373.5 million, an increase from $175.1 million during the same period in 2018. Operating costs and losses also spiked for the company, which was only founded in 2013.

SmileDirect also noted in its filing that it had received from pushback from the dental community for its products. The American Association of Orthodontists has alleged that the company’s service is “illegal and creates medical risks,” according to .

“A number of dental and orthodontic professionals believe that clear aligners are appropriate for only a limited percentage of their patients,” SmileDirectClub wrote in its S-1 filing. “National and state dental associations have issued statements discouraging use of orthodontics using a teledentistry platform.”

More tomorrow when it begins trading.

Illustration Credit:

, a California-based digital content delivery and Internet security company, raised its IPO price range this morning from a prior $10 to $12 interval to $12 to $14 per share.

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The unicorn did not adjust the number of shares it expects to sell in its public debut. At its new prices, Cloudflare would be valued between $3.5 billion and $4.1 billion. (Cloudflare’s value reaches a maximum of $4.18 billion when shares reserved for underwriters are included in the calculation.) Each price is comfortably higher than Cloudflare’s final private valuation of $3.25 billion set in March of this year .

The market expects the company to price Thursday after the bell and trade Friday morning. Cloudflare’s maximum IPO raise is now $563.5 million, calculated using $14 per share and counting shares reserved for underwriters in the calculation.

We anticipated the new, higher prices. When the company initially set an IPO price range, we offered to “wager $1” that we see another SEC filing form the company with a “new price range.” Why? Because the company’s IPO price felt light in comparison to its private valuation given that the company disclosed accelerating revenue growth and falling cash consumption. Investors covet both, especially at a company operating at scale (in excess of nine-figures of annual revenue.)

Now, however, the game becomes more complicated. Where will Cloudflare finally price? Despite what’s going on in WeWork-land, I wonder if there isn’t a smidge more upside in the tank for the popular CDN vendor. More precisely, will Cloudflare price its equity at a price over the top of its new range? At $15 per share, for example. I wouldn’t be surprised.

It’s something we’ve seen twice this year, recall. priced above range in June and priced above range in August. Both cases show that for companies with traditional economics (ahem, WeWork), there is public-market appetite for IPO shares. Perhaps Cloudflare will catch the same wave.

Looking ahead should price this afternoon, and and are in the wings.

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Welcome back from the holiday week, I hope you got some rest. We’re heading into busy IPO waters so expect a lot from Crunchbase News over the next few weeks. Also, make sure you are following for the full scoop as a number of unicorns go public.

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Let’s kick off this week’s working coverage with an IPO update from . In a fresh this morning SmileDirect announced that it intends to price its public offering between $19 and $22 per share. As the company is looking to sell over 58.5 million shares (67.3 million, inclusive of the underwriters’ option), SmileDirect is looking to raise comfortably over $1.1 billion in its debut.

The firm’s S-1/A notes a possible maximum raise of $1.48 billion, which appears to take into account a sliding share count that declines with a higher per-share IPO price (pg. 15).

SmileDirect while private from , , , and a . The Nashville-based consumer health goods company was founded in 2013, making it a younger IPO than we’ve become accustomed to seeing. And with SmileDirect working in the dental space, it’s apart from our usual technology fare. But as it is a high-growth, private company, it fits comfortably into our regular orbit.

What’s That Worth?

Valuing the firm is slightly complicated, given a two-class share structure and possible “automatic cancellation” of Class B shares for Class A shares in the offering. It appears that SmileDirect will have 386.7 million shares (387.3 million including the underwriters’ option) shares outstanding if it goes public priced at the midpoint of its range. (The company’s share count depends on the company’s final offering price; expect a final valuation note from us when we have a final price. For now, it’s a slightly annoying game.)

At the midpoint, SmileDirect is worth about $7.93 billion.

Why can SmileDirectClub command such a high pricetag? The firm has lots of revenue and lots of revenue growth. As we covered when the company first filed to go public, SmileDirect grew its revenue from $175.1 million in the first half of 2018 to $373.5 million in the first half of 2019. The company’s resulting net loss grew between the two time periods but fell as a percent of revenue. And, SmileDirect’s adjusted EBITDA swung from a small loss to a smaller profit over the same timeframe.

SmileDirect’s business is cash hungry, and more so over time. Observe:

Consuming $164.8 million in cash in six months works out to nearly $1 million per day, giving us a good idea of why SmileDirect needs to go public: Its business may be high margin, but the firm’s sales and marketing costs are high. So, the company’s growth is a bit more expensive than you’d have guessed, given the nature of its business.

A quick example of that before we go. In the quarter ending June 30, 2019, SmileDirectClub posted revenue of $195.8 million, up from $177.7 million the quarter before. From its fresh revenue result, SmileDirect generated gross profit of $161.1 million, or about 82 percent of revenue. That’s good. But then SmileDirect spent a hair of 70 percent of its gross profit on sales and marketing costs.

The company wound up posting a net loss of $32.4 million in the quarter.

We’ll know more about the value of the company when it sets a final price, freezing its share count so that we can nail down its valuation. For now, keep in mind that SmileDirectClub is just one of a number of unicorn offerings coming out soon.

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In fact, there’s enough to justify taking a look at the list of companies that have publicly filed for an IPO. No company on this list has a date or a price range, putting them a ways off from actually trading. Still, these companies are probably the next set of tech and venture-backed IPOs we’ll see.

Bear in mind that we should see a Postmates S-1 in the coming weeks, and that 9F went public recently for $9.50 per share and is worth nearly $11 as we write today. That aside, we’ll examine our four impending IPOs in the order that they announced, oldest first.

• S-1 publication date: .
• Crunchbase News coverage: S-1 post, S-1 follow-up post.

There’s no need for The We Company, better known as WeWork, to file another S-1 document to include more results. We’re in the middle of a quarter. So we expect that the next SEC filing from The We Company will include a price interval.

Companies going public set a price range for their shares, based on demand, and then either price inside the numbers, raise the range, or price outside of their expected price. Some companies even raise their range and then price above the boosted set of expectations.

Indeed, it can be strategic to set a low initial IPO pricing interval, merely so that the company going public can raise its price, and thus drive an extra set of attention to its offering, before the big day. If WeWork will pursue something similar isn’t clear, though the company’s pricing dance will be the biggest topic of the week, whenever it happens.

WeWork has a huge uphill battle ahead of it to defend its final private valuation. If it cannot reach the $47 billion figure, how close it can get will become the only thing discussed over salads in South Park. Obviously, Crunchbase News is eagerly anticipating the signal that The We Company’s pricing will provide regarding investor interest in high-growth private companies that are cash hungry and starkly unprofitable.

• S-1 publication date: .
• Crunchbase News coverage: S-1 post, graphed financial performance post.

Similar to what WeWork has in front of it, Cloudflare is another company working towards an initial pricing interval. Last valued at around $3.25 billion after a $150 million investment in March of this year, Cloudflare is upper-tier in the unicorn world. We’d also hazard a guess that the company would like to best its private valuation during its public offering.

Annualizing its H1 2019 performance yields a full-year revenue estimate of $258.3 million, though that figure is low due to it not including H2 2019 growth from the firm. Call it $300 million, then. At its old $3.25 billion valuation, the company would be worth just under 11x times revenue. Shooting for a higher number will push Cloudflare’s valuation deeper into double-digit revenue multiple territory.

This is when roadshows come into play. It’s up to the company to sell investors on not only on its future growth but future profits. More, of course, when we get that first set of pricing estimates from the company.

• S-1 publication date: .
• Crunchbase News coverage: SmileDirectClub Files to Go Public

SmileDirectClub is aiming to raise $100 million with its IPO and revealed quick revenue growth and increasing losses. The startup, which raised $ as a private company, is backed by likes of and .

SmileDirectClub, which has drawn the ire of , has ramped up its spending on sales and marketing, more than doubling the line item from $86.5 million in the first half of 2018 to $209.1 million in the first half of 2019.

It’ll be interesting to see how the startup does amid concerns about “teledenistry” and considering how its competitor Align has been doing recently on the public markets.

• S-1 publication date: August 23, 2019.
• Crunchbase News coverage: S-1 post.

Ping isn’t posting the fastest growth, but it’s also far less unprofitable than most of its ilk. It even made some money back in 2017.

What’s notable about the Ping deal is its history. The firm was snapped up by Vista Equity Partners, a private equity firm, for $600 million in June of 2016. The company has grown since then. However, it’s most recent growth rate (comparing H1 2018 to H1 2019) puts the firm’s revenue expansion at a modest 13 percent. Its ARR grew a bit faster at 25 percent over the same periods.

But with a loss of under $14 million in 2018, and just $3.1 million in the first half of 2019, Ping’s capital needs are more modest and its burn less sensational than a number of other companies in the IPO hunt. That makes its pricing harder to guesstimate than, say, a Cloudflare or Datadog.

• S-1 publication date: August 23, 2019.
• Crunchbase News coverage: S-1 post.

Datadog dropped its S-1 last Friday, showing off a history of sporadic profitability and recent, modest losses. The company reported 85.4 percent revenue growth in the first half of 2019 and over 8,800 customers. Crunchbase News wrote about Datadog’s first steps toward the public markets, and we found that the company’s growth rate is attractive when compared to its recent deficits.

With the company going public, we’re especially interested in how the public markets will value it. Datadog declined to share its valuation when it last raised money () but those numbers will come to light when it updates its S-1 with a pricing interval. According to the firm was worth around $640 million when it last raised capital.

Datadog is, therefore, hunting for a unicorn valuation while it pursues its IPO.

Illustration Credit:

Ask someone who follows tech startups and other high-growth private companies what they think about today’s IPO market and they’d probably say it’s healthy. And they would be partly correct.

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But underneath the glitz of recent debuts there is a complete dearth of IPOs close enough to a debut on a US exchange to have an expected trading date.

Indeed, a quick peek shows that Nasdaq’s is barren. The NYSE is . Even has nil coming up.

That leaves us with just a few huge offerings to look forward to. But what about the rest of the unicorns?

Private Herd

While the impending IPOs of (more here), (more here on WeWork), and (more here) will generate big news, they represent the higher-echelons of unicorns. According to , Cloudflare is worth around $3 billion; SmileDirectClub is worth about the same; and The We Company is currently marked for sale at $47 billion.

The three IPOs will make liquid a huge slice of wealth that has been locked up for some time. But the Unicorn Leaderboard lists hundreds and hundreds of companies. Knocking three off the list won’t even get a full percent of the companies exited. And I’d guess that the market is still birthing unicorns far faster than it is finding exits for them.

The backlog of unicorns that need an exit is, therefore, getting longer, not shorter. The current IPO dearth is an easily spotted facet of the problem, helpful in illustrating what . This has been an issue for some time.

If Not Now

A question I keep asking myself as I watch unicorns continue to not go public is whether they are too immature to do so (some, certainly), or if the companies in question are simply happier staying private as they have continued access to capital (some, certainly). It’s hard to tell which category is more popular from a distance, however.

Many companies are taking a risk by not eating their lumps and going public in the current window. Cloud valuations are still high, IPOs are performing well, and public investors still value growth over profit. Those conditions do not have to hold, even if markets stay highly valued in aggregate.

Waiting is a gamble that unicorns are taking by not going public. I do not understand it, but that’s probably why I’m a reporter and not a founder.1

Illustration: .