Startup IPO Trends This Year, Competition Gets Tighter

A number of start-up companies or non-unicorn startups that plan to conduct an initial public offering (IPO) are considered to be intensively carried out in 2022. 

For your information, five of the six companies planning to conduct an IPO are still not unicorns or still have a valuation of less than US$1 billion, or are still centaurs. 

The initial public offering (IPO) by a number of non-unicorn start-ups is believed to have tightened competition between players. 

A number of startup companies that disclosed their plans to conduct an initial public offering were RUN System, Blibli, Tiketcom, Dekoruma, Tani Hub, and GoTo. 

Centaur or prospective unicorn is a category for startups with a valuation of US$100 million—US$999 million. In the 2019 DSInnovate Startup Report, there were 27 centaurs from startups based in Indonesia. Meanwhile, in 2020 it increased to 43 startups. 

Non-Unicorn Startup Has Benefits for IPO 

Director of the Center of Economic and Law Studies (CELIOS) Bhima Yudhistira believes that startups that do not yet have unicorn status see the positive enthusiasm in the stock market as a positive catalyst to participate in the IPO. 

“Players saw the addition of retail investors who rose significantly during the pandemic. Then foreign investors made a net purchase of IDR 11.9 trillion in shares in the last 3 months, even when the PPKM was emergency and level 4 was enforced,” he said, Monday (30/8/2021). 

As a result, Bhima considered that now was the right moment to conduct an IPO. As for 2022, he said, a more complex challenge that accompanies this action is the risk of capital outflows responding to the Fed’s tapering off and high uncertainty in the market. 

Bhima continued, the advantage of non-unicorn startups is that lower valuations make stock prices tend to be more affordable for retail investors. 

“Yesterday, during the Bukalapak IPO, retail investors were interested but seeing the price per share of IDR 850, it was finally out of reach. But if there is a startup that has an IPO then the share price is lower, for example IDR 100-300 per share, maybe the story is different,” he said. 

Investors will be More Selective in Choosing Startups 

Furthermore, he explained that investors are expected to be more selective in addition to the issue of price per share because startup prospects have differences in each segment. 

For example, he said startups in the field of electronic commerce (e-commerce) may be saturated because the competition is more narrow to top players such as Tokopedia and Shopee. 

However, education start-ups will be in demand as competition is less intense, and the long-term prospects are still attractive. 

Therefore, Bhima assesses that analysis of business prospects, management team, and service innovation remains a priority in the eyes of investors. Due to the large number of startups that want to be listed on the stock exchange, the competition for funding is also getting tougher. 

“The impact of IPO startups is that competition will lead to the winner takes all, the strength of capital is the determinant of victory in each digital sector,” he said. 

Bhima also predicts that in the e-commerce segment there will be 2-3 big players. Meanwhile, other players will drop out because it is difficult to find funding. Startups that are late for an IPO will be abandoned by investors. 

According to him, the IPO is a means of strengthening the brand so that startups are better known by various groups. As a result, the positive externalities of the IPO have made millennials and Gen Z more familiar with the names of start-ups. 

“Now, like it or not, consumers and investors who are more senior than Gen X and baby boomers are also interested in startups,” he said.