Many venture-backed startups are unable or unwilling to go public, causing concerns among backers of venture funds who want to see returns.
Investors are becoming increasingly cautious about investing more capital in the startup landscape without getting some of their prior cash back. However, with expected delays in IPOs and a backlog of highly valued startups, relief is not anticipated in the near future.
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However, there are still some companies going public, and some of these newly public entities have been successful, even if they are venture-backed or related to the tech industry. This success is somewhat embarrassing for traditional software companies, seen as the center of tech and startups.
The Cava public offering (a privately-backed fast casual food with ecommerce elements) was successful, and this week saw the debut of Oddity Tech, a beauty-focused company that emphasizes its use of modern technology to create its products. Both Cava and Oddity priced their IPOs above their final price range and experienced a surge in value after starting to trade.
While food and beauty may not have the same growth and gross margins as traditional tech companies, these IPO successes challenge the notion that only software companies can thrive in the tech industry.
There is ongoing discussion in the tech industry regarding why software companies aren’t more profitable, considering their high-margin recurring revenue. Some argue that the belief in their increasing profitability over time may be incorrect, especially among smaller SaaS firms that struggle to demonstrate operating leverage.
