Will VC produce fewer home runs in the future?

On the possible normalization of the tech industry.

I still remember the Facebook IPO in 2012. It was an epochal event. The country finally felt like it was emerging from the economic doldrums of the Great Recession, and tech was leading the way. A ton of people got very very rich. Everyone wanted to move to San Francisco and be part of the startup world. The venture capital industry launched from relative obscurity to national prominence, and VCs became famous internet personalities. The media was obsessed with startups — the list of unicorn companies, whether there was another bubble, and (most importantly) who would be the next Facebook.

The other day I idly wondered: Who did end up being the next Facebook? What’s the most valuable U.S. company that has IPO’d since Facebook did in 2012?

Most people on Twitter thought it was Airbnb, which now sits at a market capitalization of about $59 billion. But in fact the answer was technically ServiceNow, which IPO’d a month after Facebook and now has a market cap of $97 billion. Airbnb is #2. Anyway, Joe Flaherty of Founders Collective helpfully made a list of the most valuable tech companies that went public in the 2010s, which you can peruse if you’re interested. The 2020s have had some big new IPOs (Airbnb, Coinbase, Palantir, DoorDash, Snowflake, etc.), but other than Airbnb these are currently in the $10-$20 billion range.

It’s interesting to note that none of these approaches the true tech titans — Apple, Microsoft, Alphabet/Google, Amazon, Tesla, and Meta/Facebook. The cheapest of the Big Six, Meta/Facebook, is valued at $433 billion as of this writing — more than 7 times as much as Airbnb. The other bigs are bigger still. Nor are these all old, established companies that have had several decades to grow — Tesla IPO’d in 2010 and Facebook in 2012. Despite the titanic explosion of VC interest, startups, and money since Facebook went public, there have so far been no similar mega-hits. A graph will show this fact pretty vividly:

Sources: Founder Collective, Companiesmarketcap.com

(Note: Alibaba, which is truly huge at $630B, is not included here, since it’s a Chinese company that isn’t very relevant to the U.S. VC or tech industry.)

So why didn’t we get the next Facebook? Well, one possibility is that the newer crop of companies just haven’t had time yet. After all, when Tesla went public it was worth barely more than $2 billion, and Facebook was a seventh of its current size. Airbnb might one day become a trillion-dollar behemoth. And there are a couple of very big U.S. tech companies that are still private — SpaceX at $127 billion and Stripe at $95 billion (though private valuations are difficult to compare to public ones). These may end up being the titans of the post-2012 generation.

But if so, it’ll take a while. The recent stock market crash has hit newer tech companies especially hard, and has produced a quiet, parallel crash in startup-land. This crash provides a sort of pause that allows us to reflect on how the market for new tech companies may have changed. In particular, it’s interesting to ask whether the lack of a “next Facebook” since 2012 means that venture investments might be less positively skewed than before — and if so, why that might be the case.

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