The IPO market for technology companies has been slow (see here). I’ve been curious why that’s the case (see here). Klaviyo is a known technology company that IPO’d in September 2023. I came across an interview with the CEO and co-founder, Andrew Bialecki. The interview caught my attention because he discusses initially bootstrapping and growing to over $1 billion in revenue and a market capitalization (i.e., valuation) of over $10 billion as of this writing.

One section of the interview addressed what he thinks the criteria are for technology companies to go public or, said differently, what a company needs to demonstrate to get public market investors to buy its stock and have a successful IPO. Here are the criteria:

• Positive free cash flow – the company needs to generate, not consume, cash.
• Sustainable business – The company provides a product or service that customers will value in future years.
• Durable growth – The company must be growing at a healthy rate. The smaller the revenue base, the higher the growth rate investors want to see. The growth rate must also be durable for the next four or five years.

Growing at a rapid rate that’s durable while not burning money isn’t easy to do. Many technology companies can achieve high growth rates, but they burn a ton of cash to accomplish this.

Bialecki’s perspective on the current IPO market for tech companies is valuable, given he’s one of the few who has successfully completed a technology IPO in the last two or so years.

He shares other great nuggets during the interview. If you want to hear just the section on his thoughts on IPOs, see here, but I found the entire interview worthwhile.