Expected IPOs This Year

It’s January and time for an endless series of last year’s results and next year’s predictions. On the IPO side, CNBC and TechCrunch between them are predicting a total of eleven unicorn scale IPO’s this year. What did these companies do to drive this massive success, and is there anything we can learn from them?

One thing they have in common is almost all of the companies are already category kings - they are not upstarts that have been successful at fighting for market share against existing competitors. Instead, most of these potential IPOs have defined and created their own categories. Let’s take a closer look.

First up, the lists had only had two companies in common: Uber and Lyft. In this case, depending on your definition of the “ridesharing” category, either one of them first invented it, but clearly Uber took it and quickly became the dominant category king, with approximately 70% market share versus 28% in the U.S. last year, and globally, higher. Research by Play Bigger, published in the Harvard Business Review, showed that category kings, on average, end up with 76% of the category economics, and while market share does not directly map to that, you can imagine that Uber could be close to that figure. It’s good to be the king! That said, given Lyft’s continued growth in share, profitability in sight, and a potential unicorn IPO, it can still be a solid business to be a category “prince” in some circumstances.

Interesting for both companies is another insight from the research abovethe IPOs that delivered the most value post-IPO had gone public six to ten years after founding. This puts both Uber and Lyft close to the window where their category development could be so mature, they won’t deliver huge shareholder value in 2020 and beyond.

Other IPO candidates are also clearly category kings.

  • Airbnb owns the community-driven hospitality space and has clearly been valued as the king at at $31B, which is about 8X what their closest competitor, Home Away, was acquired for a few years back.
  • Slack dominates the workstream collaboration category with a 70% market share.
  • Instacart leads the multi-store grocery delivery space by a good margin despite facing competitors like Amazon and Walmart.
  • Peloton created a new fitness category of on-demand workouts that not only do they dominate, but has grown larger than the category king of the nearest “substitute” of in-person spin classes.
  • Palantir is a leader in their original government intelligence and financial protection focus areas.
  • Zoom created the category of easy meeting solutions and has been so successful, so fast, that they are already considered a leader in the overall meeting solutions category up against entrenched players like Cisco and Microsoft.

Looking to the other prospective IPOs, Medallia, Rubrik, and Cloudflare, while successful, are not clear category kings in the broader areas in which they play, though they do dominate some segments.

All in all, in the upcoming year, the potential IPOs look to be dominated by category kings. Just one more reason to define your own category and not play by someone else’s rules.

TechCrunch - Unicorns will probably go public

CNBC - Tech IPO’s expected