Centaurs can go public as soon as the IPO window opens. Unicorns have nowhere to go
There are more than 1,000 private companies with a valuation of billions of dollars, backed by venture capital going public. However, less than one in six is a candidate for an IPO.
Data from Bessemer Venture Partners’ State of the Cloud 2022 report divides the unicorn market into two categories. (Notes here about Marketingwithanoy+ from Bessemer partner) Mary D’Onofrio†
The first includes unicorns that have reached the $100 million annual recurring revenue (ARR) threshold, which Bessemer calls “centaurs.” The other group contains unicorns that have not yet reached that income mark.
According to Bessemer, the number of centaurs is growing over time – last year we had 60 companies that hit the revenue benchmark, up from about 40 in 2020 and 35 in 2019. Those numbers may seem impressive, but in contrast to the fact that more than 500 unicorns were minted last year, there is a yawning gap between companies that are valued as IPO-ready and those that actually be†
If we do some loose calculations, 60 companies that reached the $100 million threshold last year, compared to 520 new unicorns, come out at about 11.5%, or less than one in eight. However, Bessemer estimates that there are 150 privately held startups with $100 million in annual recurring revenue or something like that, out of about 1,000 unicorns, meaning about 15% of unicorns hit the target — just under one in six.
(For reference, I’m using $100 million as an IPO-ready earnings benchmark, which I don’t think will prove controversial, and $1 billion as a valuation indicative of the public market Scale value, which, again, should not cause too much controversy. More on both later.)
How did we end up with so many unicorns and so few IPO-ready private technology companies with IPO-scale valuations?