By Jennifer Fonstad
I remember when Aaron Levie came into our office and pitched Box Inc. in 2005. He wanted to drop out of college because of the opportunity he and his co-founder Dylan Smith saw around information sharing in the cloud. It was not long after the Google IPO, and we were seeing a stream of young entrepreneurs taken with Google’s success. Hosting in the cloud was nascent, but Aaron saw a world where information should be accessed from anywhere and it was just something he had to do.
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Like many young entrepreneurs after the successes of Yahoo, Google, and Facebook, all Aaron saw was possibility. He was right, if we look at the market for IPOs and M&As in the years following the triumphs of these tech giants.
Will Snap inspire the same? That is the billion and billion, and billion dollar question.
As an investor in technology for the last two decades, it looks like it just might. Sometimes it just looks so easy. As we saw with Snap, you can take a couple of smart young entrepreneurs, a cool app, 158 million users, and then everyone thinks they can do it, too.
And that’s a good thing, as the notion that it may be possible is often a key impetus behind future cycles of innovation. It’s possible for a new start-up to spin out of a company like Snap, as we have seen with Google and other tech startups. Entrepreneurship and innovation thrive on possibilities.
And storied IPOs remind investors, corporations and Wall Street of the possibilities, too. Historically, the number of IPOs, M&A deals and investor dollars typically saw an uptick two years after major tech companies, such as Yahoo, Google and Facebook, went public. The role these companies have played is critical – to our culture, our economic vitality, and to the next generation of innovators.
In the two years after Yahoo went public in 1996, the number of IPOs rose by 45%, compared with the previous two years. When Google made its debut on Wall Street in 1994, IPOs rose by 80% during the two years following the public offering; for Facebook in 2012, it rose by 60%. What’s more, nearly $100 billion poured into venture during the two years following Facebook’s IPO, which was almost double compared with the previous two years.
The M&A markets saw similar increases. The two years after Yahoo’s IPO saw three times more M&A deals than the two years prior. Similarly with Google’s IPO, M&A deals during the subsequent two years nearly doubled. So for the ecosystem, these moments are important indicators of what smart risk capital can bring – in terms of financial returns, products, and job creation.
We will likely see similar activity in M&A as corporations use the start-up community to stay relevant. And yet, even if the response doesn’t match prior years, sometimes it just has to inspire that next Evan Spiegel or Aaron Levie. And now, with Snap as an LA-based company, they don’t even have to be in Silicon Valley anymore.
Jennifer Fonstad is co-founder and managing partner of Aspect Ventures.