The term of a typical early stage venture capital fund is around 7 to 10 years.  An often quoted standard today for taking a technology company public is "you must have annual sales of $100 million and be profitable".  As IPO's are one of the key avenues that these funds rely on to achieve their targets, is the expectation of an IPO within that timeframe borne out by the experience of the past?  The study below by Christian Chabot sheds some light on the subject.

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The vast majority of today's most successful software companies wouldn't have been ready to go public within the 10 year window of an early stage venture capital fund:

• 25% of today's most valuable software companies took 13 years or more to reach $50m in sales
• 50% took 9 years or more
• 15% took 5 years or less.

If the majority of today's most successful tech companies weren't ready to go public until well after their first decade as a business, perhaps we should be resetting expectations about timeframes to IPO, on the vehicles used for achieving investor returns and/or the size companies need to be in order to go public?

The study is based on the top 100 publically traded software companies. All of the sales numbers have been inflation adjusted, so we can compare the performance of a company founded in the 80's (e.g., Adobe) to one founded a few years ago (e.g., Salesforce.com).

It separates out by colour those that are "rocket ships" (red) companies that reach $50 million in annual sales in six years or less, "hot companies" (orange) companies with $50 million in revenue in the first seven to 12 years, and "slow burners" (blue) companies which take 13 years or more to hit $50 million.