Why VC-Backed IPOs Are Valued So High Compared to Acquisitions
March 12, 2014
The path to an initial public offering tends to be exponentially more difficult than a merger or acquisition, so it comes as no surprise that valuations for VC-backed companies that are exited via IPO are several orders of magnitude larger than for those sold to strategic or financial acquirers. Throughout the early 2000s, the median valuation of companies at IPO was approximately 3x larger than it was for companies that were acquired. The difference has been even wider in recent years—greater than 5x each year since 2008 and sitting at 6.5x in 2013.