The pipeline of new IPOs looks especially healthy right now. One reason: Q1 venture capital investments in the United States are reaching their highest level in 15 years.
The number of deals, 1,020, was down slightly from the 1,027 made in Q1 of 2014. But the amount invested was up 26% to $13.4 billion, according to a new MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters.
It marked the fifth consecutive quarter in which VC investing exceeded $10 billion.
And most of that money went to more mature startups in later rounds of VC investing. That suggests a wave of new IPOs due to hit within the next two years. Promising companies typically have an initial public offering within a year or two of a late-stage investment.
In Q1, $4.7 billion, or 31%, of the funding went to late-stage deals. And another $5.4 billion went into expansion-stage deals, the level just prior to late-stage financing.
And a dozen of the deals in the quarter exceeded $100 million, another sign to expect a batch of new IPOs. At that point, it usually makes sense for a company to fulfill further capital needs by going public.
One relatively new trend driving the rise in later stage VC investing is higher participation from mutual funds and private equity funds unwilling to wait for these companies to go public.
"What we have here is a pattern where this incremental money is all coming from outside venture capital," John Taylor, head of research at the National Venture Capital Association, told Xconomy.
That additional money has created dozens of "unicorns" - startups worth $1 billion or more. Until the past few years, startups with such lofty valuations were almost unheard of. Now The Wall Street Journal has an entire Web page devoted to them, and lists 83 unicorns worldwide.
Most of the companies that landed the biggest rounds of funding in Q1 are unicorns. These nine startups are top candidates to be new IPOs in 2015 or 2016...
Where to Find Tomorrow's Biggest New IPOs
Of the companies that received the most venture capital in Q1, these have the best chance to go public within the next 24 months:
New IPO Candidate, No. 1: Uber Technologies Inc.
Raised in Q1: $2.6 billion (Series E)
Total Raised to Date: $4.9 billion
Estimated Valuation: $41.2 billion
Type of Business: Transportation
The Story: Proving the power of software in the age of mobile devices, Uber's founders came up with an app to connect private taxis and customers. The company continues to raise money at a rapid clip to fund growth. Uber currently operates in 250 cities across 55 countries worldwide. The company's valuation already puts it ahead of Twitter Inc. (NYSE: TWTR). Most expect an Uber IPO in 2015.
New IPO Candidate, No. 2: Space Exploration Technologies Corp. (SpaceX)
Raised in Q1: $1 billion (Series E)
Total Raised to Date: $1.2 billion
Estimated Valuation: $12 billion
Type of Business: Space transportation
The Story: SpaceX is one of Tesla Inc. (Nasdaq: TSLA) CEO Elon Musk's other companies. The concept of SpaceX is simple but incredibly difficult to pull off: to build reusable space vehicles. Google Inc.'s (Nasdaq: GOOG, GOOGL) $1 billion investment in Q1 touched off speculation that a SpaceX IPO is near, although Musk has said he's in no hurry.
New IPO Candidate, No. 3:Lyft
Raised in Q1: $530 million (Series E)
Total Raised to Date: $862.5 million
Estimated Valuation: $2.5 billion
Type of Business: Transportation
The Story: Like Uber, Lyft uses a mobile app to connect customers and private cab drivers. The two companies have become fierce rivals. Lyft is a fraction of Uber's size. But Lyft has a pretty big reach, operating in 250 cities and 50 countries. If Uber does have an IPO this year, Lyft will feel pressured to follow suit not long after.
New IPO Candidate, No. 4: Pinterest
Raised in Q1: $367 million (Series G)
Total Raised to Date: $1.1 billion
Estimated Valuation: $11 billion
Type of Business: Digital bookmarking site (social media)
The Story: Pinterest lets users "pin" images to their pages to share with other users. That simple idea has grown to over 30 billion unique pins and about 47 million active users in the U.S. Wedbush Securities estimates that its advertising program, "Promoted Pins," could generate $500 million in revenue in 2016. That ability to make money - always challenging for social media companies - will make Pinterest a very sought-after IPO.
New IPO Candidate, No. 5: DraftKings
Raised in Q1: $250 million (Undisclosed)
Total Raised to Date: $325 million
Estimated Valuation: $900 million
Type of Business: Fantasy sports website
The Story: DraftKings, like rival FanDuel, lets users play fantasy sports with real money. That twist creates a revenue stream that has attracted the attention of media companies. The entire $250 million that DraftKings received in Q1 came from The Walt Disney Co. (NYSE: DIS). With FanDual also getting close to an IPO and the fresh infusion of cash from Disney, going public is the next step for DraftKings.
New IPO Candidate, No. 6: Social Finance (SoFi)
Raised in Q1: $200 million (Series D)
Total Raised to Date: $766.2 million
Estimated Valuation: $1.3 billion
Type of Business: Student loan refinancing
The Story: SoFi arranges for low-interest loans for low-risk borrowers, primarily young professionals. In cases where borrowers have lost their jobs, SoFi has paused payments and called on other borrowers to help land them a new job. Bloomberg reported last month that SoFi is planning an IPO for the second half of the year and seeking a valuation of $3.5 billion.
New IPO Candidate, No. 7: SimpliVity
Raised in Q1: $175 million (Series D)
Total Raised to Date: $276.5 million
Estimated Valuation: $1 billion
Type of Business: Data center management hardware
The Story: SimpliVity seeks to simplify the management of virtualized data centers with OmniCube, a product that does the job of a dozen different IT products. And that saves the customer money. Right now SimpliVity has an annual revenue run rate of $100 million with an IPO in the "foreseeable future."
Type of Business: Cloud-based civic engagement solutions for government agencies
The Story: As the disastrous rollout of the Healthcare.gov website made clear, the government doesn't always do a good job of making its Web-based services easy to use. That's where Accela comes in. The company's cloud-based tools help nearly 1,000 government clients serve the public. With 90,000 government entities in the United States, the potential market is huge.
New IPO Candidate, No. 9: Dataminr
Raised in Q1: $130 million (Series D)
Total Raised to Date: $179.6 million
Estimated Valuation: $700 million
Type of Business: Big data
The Story: Dataminr scours the Internet for information in real time and uses algorithms to flag important developments. It's become popular on Wall Street as a first-alert tool and to filter out false signals. The Dataminr CEO told The Wall Street Journal that the company is seriously considering an IPO.
The Bottom Line: Venture capital was pouring into late-stage startups in the first quarter. The flood of money into these maturing companies means we should be seeing a lot of media-grabbing new IPOs over the next two years.
More on IPOs: The IPO roadshow - or "dog and pony show" - is the most important step that a company takes to market its new stock. In fact, 82% of institutional investors cite the roadshow as a key component of their buying decision. Here's the one thing that ensures a successful IPO roadshow...
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.