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A Windfall for Silicon Valley?

With people like Jason Pressman celebrating their investment success, more and more are looking to ride the wave of success.

Mr. Pressman back in 2008 invested in Zuora, which recently started trading on the New York Stock Exchange.  By market close last week it saw Zuora’s stock soar 43% making Mr. Pressman venture capital firm’s $17 million investment in the company worth roughly $150 million.

Many Silicon Valley venture capitalists including Mr. Pressman expect this kind of windfall to continue.

There is a change brewing, investors, bankers, and analyst are predicting a wave of initial public offerings to bring some of the most highly valued and recognizable start-ups to the public market over the next 18 to 24 months.  Companies who have remained private are now going public or thinking more seriously about it.   Start-ups like Dropbox and Spotify who successfully went public over the past month, are attracting more to do the same.

Tech investors are looking to bank on this, as the number of initial public offerings increase

Investors like Rob Hayes are looking at what is coming.  Hayes a general partner at First Round Capital led a $1.5 million funding round for Uber in 2010.  Then the company valued at $4 million, now worth $68 billion.

Some of these privately held companies are looking at making changes that position them to go public within the next year or two.  Uber who is a privately held company is looking at going public next year.  Lyft is exploring the idea.  Airbnb is also making moves that suggest becoming a public company.

Once start-ups go public and their employees get some of the wealth, executives and engineers may leave with more resources to begin their own start-ups. Giving venture capitalists a fresh set of companies to invest in, renewing the cycles of innovation and experimentation that sit at the heart of Silicon Valley.

What delayed these private companies to go public was that private capital has been easily accessible that start-ups have been able to get ample funding without the headaches of an I.P.O.  A few factors are encouraging companies to go public now, public investors are hungry to buy shares of fast-growing companies, early employees are looking at quick money wanting cash or their stakes, and some start-up executives are eager to prove themselves as public company chief executives after founders like Facebook’s Mark Zuckerberg and Twitter’s Jack Dorsey have said going public improved their discipline and focus on profits.

“At all levels, there are more and more companies who are thinking about should we go public this year or next?” said Noah Wintroub, JPMorgan Chase’s vice chairman of investment banking. “You’ve got an environment now that’s conducive to asking that question, and also a lot of companies that have scaled up to the point where they can go now.”

Some analysts expect more immediate activity among midsize start-ups. Slack, the maker of corporate messaging software, which is valued at $5.1 billion, and DocuSign, an e-signature company valued at $3 billion that filed I.P.O. paperwork last month.

Once this generation of start-ups goes public, it will ease the anxiety of the wealthy families, pension funds and university endowments that finance the venture capitalists’ investment funds.

Investors are eager for some cash back, the more they make the more it drives others to create start-ups for them to invest in.

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A Windfall for Silicon Valley?

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