Startups such as Uber, Airbnb, Xiaomi and TransferWise are among over 150 privately held startups with over $1 Billion in valuation. These are the Fortune 1000 companies of the next decade. Unlike traditional companies however, these companies are going public later as the median time to IPO has increased from 4 years in 2000 to over 11 years in 2015. These startups are raising a lot more money privately and going public at much higher valuations, making it less likely for post IPO investors to get large returns in the public markets.
The top 20 most valued startups raised money in the public markets each year until 2011, but they have all raised private capital since then. This has resulted in less than 2% annual growth in the number of companies going public since 2001.
More investors seeking to fund startups earlier and participate in their growth since their inception. The rise in the number of accelerators such as YCombinator and online funding platforms such as AngelList has also contributed to support for startups at the earliest stages and made it easier for entrepreneurs to raise initial capital.
This has coincided with a rise in angel investing as well with over 200 (48% increase over the previous 12 years) new venture groups formed since 2012 and 100K (30% increase from 2008) new angel investors putting their money in startups.
Investing in public and private markets require diversity to manage risk, a strong deaflow and pipeline of available investments and securities to exchange capital for equity. There are many differences between private and public market investing including, lack of easy liquidity for investments, tools to manage portfolio and time horizon for investment return.