Are tech IPOs coming back?

That is an ever-present question in Silicon Valley during any lull in the flow of shining private companies that get anointed as public companies. And we certainly have been in a long lull. This year, just one venture-backed tech company, Twilio, has made it public, compared to an average of 37 per year between 2001 and 2015.

But the comeback question isn’t the right one to ask this time around.

Looking for a magic window to open in the public markets for tech companies to leap through assumes there are separate criteria for tech companies and other companies. Those days are over. Tech is a part of every company and every industry in some shape or form today, which means that tech companies as investments are measured against any other alternative corporate investment — pure tech or not.

So are tech IPOs coming back? Not anytime soon. But that doesn’t mean smart tech companies can’t pull it off — and in many cases absolutely should.

Send in the unicorns

It must have always seemed a bit silly outside of the tech scene, all this talk of unicorns trotting their $1 billion-plus valuations out to one ever more massive fund-raising event after the next. But while Silicon Valley watched the paper fortunes of these magic companies go higher and higher (until recently), the rest of the world was more or less treading water — or drowning.

Consider that the global economy has essentially been flat over the past several years; global GDP actually shrank during 5 consecutive quarters between 2015 and 2016. And despite seemingly low unemployment rates in the U.S. today vs. what they were during the recession of 2008–10, many remain out of work while others are stuck in jobs with stagnant salaries. You don’t have to look far past the election rhetoric to understand why so much social unrest and turmoil persists here and abroad.

Stir that all together and it causes people to conclude that we’re not in an economic growth environment; we’re in a flat, or probably down environment that will likely get worse before it gets better.

Contrast that sentiment to this herd of fantastically valuable, fast-growing tech startups, and it’s no wonder the world outside Silicon Valley isn’t buying into the pitch. People are suspicious that any company could be on a path of radical growth when they’re treading water at a job for 15 years and haven’t seen a raise in the last five. Unicorns, lest we forget, are mythical beasts. Why should people believe?

The ’90s are not forgotten

We’ve seen this movie before of course. If you weren’t there in the late ’90s, well, the only thing more ridiculous than the IPOs were the parties. That should have been a clue that things were out of whack.

Basically, the people who pry the public markets open or shut them down — the massive hedge fund guys in Connecticut, New York, and Boston — decided they were open to buying these new emerging tech companies in the public markets, despite no viability (or revenue) as businesses.

Then everyone piled in. All the pension funds, all your relatives — you heard of people who just traded tech stocks on their poky internet connection all day and said they were making a fortune. It was great! Everything was up and to the right, until, of course, it wasn’t.

To be fair, the dotcom era did set in motion the real promise of the internet. Legendary VC John Doerr was right — even in all the hype, the internet was under-hyped. But as investments, everyone got ahead of themselves. And since then, belief in the story technology as force for massive, valuable change — Google, Amazon, Apple and Facebook aside — has been hard to come by.

Real estate became the next thing to inflate, and then the recession of 2007–2008 came crashing down on everything. What’s happened since then is that we have sort of had this recovery, but sort of not.

Big money comes back to startup land

There have been a handful of tech IPOs since the worst of the recession ended, companies like Facebook, LinkedIn, Palo Alto Networks, Tableau, Workday, ServiceNow and Splunk, but what happened in the meantime is that technology did what it is best at — moving relentlessly forward. Web-scale companies like Uber, Snapchat*, Airbnb, Palantir, Flipkart, Pinterest, Dropbox, Spotify, Lyft, Nutanix*, Stripe, Appdynamics*, Mulesoft* and many others emerged, as did ventures in big data, machine learning, and a whole new technology infrastructure in the cloud. And the explosion of mobile technologies threw fuel on everything.

Once again, the hedge fund folks looked up and saw that there was real growth and that these technologies would bring about significant valuable change. Again, they believed, and piled money into — and really created — all your favorite unicorns. They offered the money at valuations that they thought the public markets would be receptive to. They got a little over optimistic. Public market investors weren’t having it — they were having a hard time understanding why a company like Uber should be worth 50X revenue when GM is 6X revenue.

The tech IPO is dead

What’s it all mean now? I think it means that truly successful tech companies are going to have to measure up to the same standards that great non-tech companies live up to — brands like Berkshire Hathaway, Whole Foods, CVS, UPS, Starbucks, Costco that deliver great products and services, have strong growth, make real money and build an organization behind all of this that customers love.

Miss any of that, and you can forget about getting any love from the public markets. And you need to think of the competition as not just the constellation of other start-up companies in your space, but any great company that has shown the ability to become “technology forward” could be thought of as a competitor or an alternative.

There are outstanding tech companies that meet all those conditions. And I believe that we are in a tech innovation cycle that really is changing the world. What that doesn’t mean is that some window flies open, and everything thing isn’t nailed to the floor gets tossed through into the public markets.

The tech IPO is dead. But great tech companies can — and will — still go public.

This post appeared on TechCrunch on September 17, 2016. https://techcrunch.com/2016/09/17/what-do-you-call-a-tech-unicorn-the-goes-public/

*Denotes Lightspeed portfolio company.