- Insider spoke to Will Connolly and Jane Dunlevie, two Goldman Sachs’ partners within its technology, media, and telecommunications division, which has worked on some of the biggest tech IPOs this year.
- Connolly and Dunlevie shared their expectations for 2021, from their view that the traditional IPO roadshow may largely be digital even after the pandemic, to predictions for how the regulatory environment could evolve in Washington.
- The bankers also shared thoughts on the blurring lines between the TMT group and deals that bubble up within other industries, like financial services.
- Visit Business Insider’s homepage for more stories.
Initial public offerings have been red-hot at the end of 2020, for better or for worse, but a new regime in Washington is giving some bankers pause about what the future holds.
As a President-elect Joe Biden and his Democratic administration readies itself to take over from outgoing Republican President Donald Trump, uncertainty has got some on edge about what the future may hold for tech companies looking to go public.
“I think we don’t know what the new administration will mean as it relates to IPO activity just yet,” Will Connolly, a partner at Goldman Sachs who also serves as co-head of Goldman’s West Coast financing group and head of technology equity capital markets, told Insider in a recent interview in December.
Connolly, who is based in San Francisco, focuses on equity-related matters for tech companies, including IPOs.
“What we do know is in the last several years, our clients have experienced a regulatory environment that moved quickly,” he said.
Read more: Why the IPO market is exploding in a frenzy that rivals even the 1999 euphoria
Indeed, after a brief hiatus from new listings due to market volatility from the pandemic, the second-half of the year saw several high-profile IPOs take place. Snowflake, DoorDash, and Airbnb each all raised north of $3 billion from their public market debuts.
Now, that could be about to change. As Biden is set to become the 46th President of the United States on January 20th, Wall Street could be in for a White House and federal regulatory ecosystem that may prove to be tougher on big banks and step up the scrutiny with which they review their deals.
That said, the Trump administration hasn’t gone easy on companies that fall within the tech world. The president’s relationship with Big Tech has been largely combative, including drama around the status of social media app TikTok and its ties to China, or the recent wave of antitrust lawsuits brought against Google by several state attorney generals.
But at the same time, Trump’s administration has also proved beneficial to Silicon Valley recently. On Tuesday, the Securities and Exchange Commission approved the New York Stock Exchange’s plan to allow companies that go public via a direct listing to also raise money by issuing new shares.
The decision was largely viewed as a favorably one for startups and their investors, which would be able to skirt some of the costly bank underwriting fees that come with a traditional IPO.
However, Jay Clayton, the chairman of the SEC, announced this month he would be stepping down from his role at the end of the year. Biden has yet to nominate a replacement.
“As with any administration transition, some of those people change, and priorities may change,” Connolly said. “We don’t have a pessimistic view, but we do recognize that there probably will be changes — and we’ll all have to be nimble and adapt accordingly.”
What is TMT anymore?
Insider spoke to both Connolly and Jane Dunlevie, another partner within Goldman’s TMT division and the firm’s co-head of global internet investment banking business, about their experiences in the rollercoaster year that was 2020 and what to expect in 2021.
Both Connolly and Dunlevie were named partners at Goldman — among the firm’s most rarefied circles of top execs — in the fall. Goldman’s TMT division had seven bankers elevated to partner status this year, a signal Goldman is betting the team will shine disproportionately in the years ahead.
Among his clients, Connolly counts tech names like Snowflake, Okta, and Slack. Dunlevie’s tech crown jewels include firms like Cloudflare, PayPal, and Zillow.
But the makeup of Connolly and Dunlevie’s clientele could evolve in the coming years.
There has been a rapid acceleration of the blurring lines between TMT and other industry sectors. Investors and corporate execs across the Street are quietly debating what constitutes TMT, which traditionally denotes technology, media, and telecommunications.
“I think it’s probably symptomatic more of tech’s role in every industry, and the fact that we haven’t seen moments where tech is this important, and that only continues to get stronger,” Dunlevie said when asked about what defines TMT and where that sectors ends, and where another, say FIG (financial institutions group) begins.
“We’ve obviously seen an incredible wave of innovation in financial technology,” she added, naming sectors like consumer retail, business-to-business, and industrials software as leveraging the characteristics of both software and fintech to enhance their offerings.
“I think more and more businesses are going to market through tech,” she said, “and more and more traditionally tech investors are picking winners in categories that maybe haven’t historically been driven by tech.”
Goldman had a number of big TMT IPO wins in 2020
Goldman remained a key piece of the tech IPO pipeline in 2020, leading DoorDash, Lemonade, and Snowflake’s listings, in addition to involvement in Airbnb’s IPO.
Dunlevie said Goldman’s continued success in the tech community with IPOs amounts to years spent building relationships, and leveraging the bank’s other services, including private capital raises or the assessment of strategic acquisitions through M&A.
To be sure, this year hasn’t all been smooth sailing for IPOs, though, and some of Goldman’s own TMT clients have hit icebergs.
For instance, DoorDash was one recent blunder. The stock popped 78% above its IPO price of $102 a share when it opened for trading on December 9 at $182, meaning the shares could have potentially been priced higher. The stock has since dropped to around $154, as of December 24.
Both DoorDash and Airbnb, which popped 115% at the open of its trading debut, used a hybrid model that amalgamates elements of a traditional IPO and an auction to avoid such surges.
Read more:Inside the attempt to reinvent the IPO process with Airbnb and DoorDash
Buy now, pay later startup Affirm and online gaming service Roblox both announced plans to delay IPOs that were previously planned for 2020 at least partially as a result of the volatility in new listings.
But in spite of the IPO turbulence, Connolly said he doesn’t expect companies to delay going public en masse or reconsider public offerings altogether.
Rather than seeing companies back off from an IPO, “we’re actually seeing the opposite,” he said. “We’re seeing people recognizing that we’re in an incredibly constructive market environment and, over the last month, we’ve participated in activities to kick off IPO or direct listing processes for more companies than we ever have before.”
‘Never have we seen large tech better capitalized’
Looking ahead, one area of significant resource optimization that’s likely here to stay is the efficiency that has been introduced in the famed IPO roadshow process, Dunlevie said.
Traditionally, bankers hit the road leading up to an IPO to court investors and generate buzz for a public offering. That entails rigorous, widespread travel and the movement of teams of bankers.
The coronavirus pandemic grounded travel and forced bankers to find creative solutions for engaging investors without meeting them face-to-face, though.
“It’s been highly productive,” Dunlevie said, looking back. “We’re getting roadshows done in fewer days, for the most part, so we can cut off one or two or even three days of meetings, and these IPOs are getting done I think incredibly successfully.”
Going forward, much of that is here to stay, she added.
“I think our expectation is to try and take the best of both worlds, if and as the world reopens,” she said. That might mean management teams hit up one or two large cities, but “we can probably take many of these efficiencies into processes going forward,” she added.
Meanwhile, the rollercoaster year that Wall Street and the world are emerging from hasn’t stopped the buildup of kinetic energy driving future IPOs. Insider first reported last week that Goldman has been tapped by Coinbase to lead its upcoming IPO — which underscores the growing intersections of TMT and fintech in the years ahead.
Looking forward to 2021, Dunlevie said that she and her team are feeling bullish about prospects for a busy year of IPOs.
“Never have we seen large tech better capitalized,” she said. “I think that’s driving much of the attractiveness for the next wave of IPO to build their businesses in the public lens.”
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