Figma's IPO success could push Canva and these other software companies to go public

Figma's recent record-setting IPO has signaled a "red-hot" market for new listings, prompting D.A. Davidson to identify several large private software companies, notably Databricks and Canva, as likely candidates to accelerate their public debuts. This surge in investor demand, reflected in the Renaissance IPO ETF's outperformance, is also driven by institutional investors seeking liquidity from mature private holdings, mirroring Figma's successful exit. While current conditions are favorable, the potential for market volatility could accelerate these companies' IPO timelines before the window closes.

Analysis

The successful initial public offering of Figma, marked by a record first-day gain, is signaling a significant reopening of the IPO market and stimulating investor appetite for new listings. This sentiment is quantitatively supported by the Renaissance IPO ETF's 17.6% gain over the past three months, outperforming the S&P 500's 11.3% advance. Consequently, several high-profile private software companies are now considered prime candidates to accelerate their IPO plans, with D.A. Davidson highlighting data-analytics firm Databricks and design-software company Canva as top contenders. Strategic moves are already underway, evidenced by Canva's hiring of Zoom's former CFO, a classic pre-IPO signal. The primary driver for this potential wave of listings is the pressure from institutional investors, who funded these companies through recent down-cycles and are now seeking liquidity, as demonstrated by the successful exits of venture firms like Kleiner Perkins and Sequoia Capital from Figma. However, the current favorable window is subject to market volatility, which could either hasten IPO timelines as companies rush to market or slam the window shut if sentiment sours.

Key Decisions for Investors

• Investors should closely monitor news flow and private market activity for key candidates like Databricks and Canva, as strategic moves such as executive hires or pre-IPO funding rounds can be leading indicators of an imminent public offering.
• Consider exposure to the IPO market's momentum through specialized vehicles like the Renaissance IPO ETF to capitalize on the potential wave of high-profile technology and fintech listings.
• Given that market volatility could abruptly alter the landscape, it is critical to assess the risk that the current IPO window may close, potentially impacting the timing and success of these anticipated offerings.
• Evaluate the cap tables of potential IPO candidates, as companies with significant backing from institutional investors seeking an exit, similar to Figma, may be more compelled to pursue a public listing in the near term.