New York poised for a banner IPO year led by Oscar, Compass, UiPath

Traders on the floor of the New York Stock Exchange.

Source: NYSE

Wall Street has long made New York the center of the banking universe. But the city’s tech scene is finally here.

After a few IPOs of companies like Etsy, MongoDB, Datadog, and Peloton over the past decade, there are quite a few New York-based tech companies in the public markets this year.

For the coming days, DigitalOcean in New York City, a provider of data center and cloud technology, and the Buffalo-based auto marketplace ACV Auctions are on the agenda. Real estate agent Compass is slated to go public, and UiPath’s prospectus is expected to be released soon.

The 2021 tide comes after a tech IPO boom last year that saw Snowflake, Airbnb, and DoorDash each raise over $ 3 billion. According to FactSet, the volume of IPOs more than doubled last year to 494, and the New York Stock Exchange had its busiest year in existence.

The greatest offerings and most valuable companies all come from Silicon Valley and San Francisco, the center of the venture capital industry and, along with Seattle, the home of industry leaders. In 2021, New York is poised to capture more of the dollar – and attract attention.

“It took a long time for New York technology,” said Mitch Wainer, co-founder of data center operator DigitalOcean. Wainer left the company in 2018 and started working on other startups. “A lot of money and venture capital has been invested in New York technology over the years.”

New York entrepreneurs and investors attribute the strong IPO pipeline to an established ecosystem of successful technicians who have reinvested in their colleagues and helped attract talent to the region. There was also a new generation of companies bringing technology to healthcare, finance, and real estate. These are massive industries in New York and New Jersey. And New York has a thriving venture capital community, led by names like Union Square Ventures and Insight Partners, helping to expand in the nation’s largest city.

In healthcare, insurance company Oscar began trading on the NYSE earlier this month and is now valued at approximately $ 6.2 billion. Josh Kushner’s New York-based Thrive Capital is the largest shareholder. In finance, online home insurer Lemonade went public last July and is now valued at $ 6.1 billion. Compass, a real estate agent with technology, filed its filings in early March after sales growth rose 56% to $ 3.7 billion last year.

“We grew up with all of these companies in New York’s tech space,” said Wainer, noting that Oscar was one of his neighbors. He also cited software companies MongoDB and Datadog, which went public in 2017 and 2019, respectively, as companies that helped juice the tech scene.

“I think you will absolutely see more IPOs,” said Wainer. “There’s a wave of them coming. And then you’ll see new businesses in spaces that are ripe for disruption, like real estate starting to bubble.”

DigitalOcean was founded in New York almost a decade ago and is preparing to go public next week. DigitalOcean, which was last valued at $ 1.15 billion in a funding round in 2020, expects shares to be sold at a price of $ 44 to $ 47 per share, translating into a market capitalization of around $ 5 billion. Would mean dollars at the top of the range.

For Wainer’s most recent appearance, he teamed up with his DigitalOcean co-founders Alec Hartman, Ben Uretsky and Moisey Uretsky to create Welcome Homes, a platform for residential real estate. They raised a $ 5.35 million starting round in October.

“Tick the boxes”

Rick Heitzmann, a partner at New York-based venture firm FirstMark Capital, told CNBC that New York technology skeptics continued to move the goalposts for the city to determine its success. Years ago they asked if New York could produce $ 100 million exits, he said. Then it was $ 1 billion, then $ 5 billion, and then it was $ 10 billion in market cap, all brands that were outperformed.

MongoDB is valued at nearly $ 20 billion, Etsy and Datadog are valued at over $ 25 billion, and Peloton is valued at over $ 30 billion.

“New York checked the boxes in ways that some people didn’t pay attention to,” Heitzmann said. “You had to have planted the seeds 10 years ago to see the returns now. You can’t say, ‘Hey, we want to have a lot of billion dollar tech companies tomorrow,'” he said, referring to trying other markets, to establish themselves as tech hotspots.

New York City’s IPO spotlight comes at a time when many who are reaping the benefits are out of town due to the Covid-19 pandemic and the newly discovered ability to work from anywhere. New York’s economy has suffered from small business closings and a decline in activity, leading to the loss of over 620,000 private sector jobs in the city in January.

It is not yet known how many of the changes are permanent, but some companies that have adapted to a distant workforce have told their employees that they don’t need to return to the office.

Covid-19 tailwind

For a high-growth New York technology company, the pandemic has sparked an unprecedented surge in demand for its products. UiPath, which uses artificial intelligence to automate repetitive and time-consuming back office tasks, was valued at $ 35 billion in a private funding round in February. With employees dispersed and companies looking to be more efficient, companies are increasingly turning to UiPath technology.

“Covid-19 has increased the critical need for automation to overcome challenges and create value in days and weeks, not months and years,” founder and CEO Daniel Dines said in a July statement. In December, UiPath filed a draft registration with the SEC disclosing its intention to go public, and people familiar with the matter informed CNBC last month that the company was planning a direct listing.

The pandemic has also empowered businesses across the healthcare sector and capitalized on New York’s strengths. Talkspace, a New York-based online therapy provider, agreed in January to go public through a special purpose vehicle (SPAC).

Bradley Tusk, co-founder of Tusk Ventures, headquartered in New York, said other local digital health companies in his portfolio include mental health start-up Alma, dental service Tend and online pharmacy Ro Record growth. Reuters reported in January that Ro was in talks to go public via a SPAC.

“Just as the norm has changed in Covid, where offices no longer have to be where they were before, people are also more willing to get their healthcare online now,” said Tusk. “This is a great opportunity.”

SEE: Here’s a look at how the IPO market works and why SPACs can change that for good

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