Last year was a good one for technology companies hitting the public market, even with economic turbulence and geopolitical uncertainty placing a damper on fourth quarter activity.

Compared to the year prior, 30 more companies went public in 2018, and proceeds rose by 32% to $47 billion, according to a Renaissance Capital report.

As tech continues to reign as one of the hottest markets, companies are reaping the benefits of a welcoming investor base. More than 50 technology companies went public last year, accounting for more than a quarter of all IPOs with average returns of 2.2%, according to Renaissance Capital.

Within the technology market, around 20 enterprise tech companies went public, including Dropbox, Carbon Black, Tenable, Pluralsight and Elastic. Most found success, cementing the tech sector as one of the best performers.

Experts believe 2019 will be another strong year for technology IPOs. Private equity and venture capital have continued to support companies in the private market longer, leading to many larger IPOs down the road. 

A lot of hype and expectation is surrounding the debut of a few high-profile companies including Uber and Lyft, creating a waiting game but also opportunity for others. Barring further dips in the markets or geopolitical shifts, investors and tech companies are buckling in for an eventful year.

What's in store for 2019

The last "standup" year for tech IPOs was 2014, when around 35 companies completed their public offering, according to Aftab Jamil, assurance partner and global leader of technology practice at BDO, said in an interview with CIO Dive. While 2018 comparatively looks like a lot less, coming off the backs of 2015 and 2016, when IPOs were even dryer, it was a robust year.

Renaissance Capital estimates that, of a list of 234 companies on its watchlist for going public, 60% are tech companies.

Consumer-focused tech companies, such as Uber, Lyft and Pinterest, naturally draw a lot of attention. But in the business technology space, big names such as Palantir, Slack, CrowdStrike, CloudFlare, Big Switch Networks, Vertiv and Rackspace are also generating attention.

Early filing activity indicates a robust pipeline of companies in the sector that want to get out this year, Steve Ingram, National Technology and Life Sciences industry leader and partner at RSM, said in an interview with CIO Dive. Half a dozen companies have already filed or said they will file in Q1.

The year kicked off in the middle of a government shutdown, constraining the functions of the SEC in returning comments to companies that filed and delaying some companies' filing plans. But with the government now securely back up and running for the year, experts are expecting a big year even with lingering geopolitical tensions from 2018.

If the market does swing down again, companies may end up pulling their IPOs to avoid pricing in a downdraft, Ingram said. Valtech, an IT and digital transformation services company, postponed its October IPO in light of market conditions.

Economic outlook has made 2019 favorable to IPO considerations.

The economy is in the late stages of a growth cycle, and while the 2019 growth outlook is below 2018's rate, experts still expect a 2.2% growth rate this year and 1.8% growth rate in 2020, according to Kurt Shenk, senior manager and technology senior analyst at RSM, in an interview with CIO Dive. Unemployment is also at a decades' low, especially in the tech sector, where some markets have rates below 1%.

Private equity, venture capital extend the private timeline

In addition to favorable economic conditions, businesses are coming off another year where there was a load of capital to fuel them.

The active role of private equity and venture capital firms has transformed the balance of how long companies stay public and how large they are when they file for an IPO. Attention is especially hot in the technology sector, with markets such as software, SaaS and cloud bringing in large amounts of capital, Jamil said.

In the 2010 to 2012 time frame, companies would generally wait around six years on average before going public, according to Jamil. But that timeline has pushed farther outward to an average of 10 years as private equity and venture capital provide easier access to massive amounts of capital.  

Companies are staying private longer, and getting bigger and bigger, leading to more unicorns in the market than ever before. And there are many advantages to this scheme.

There is more expectation of profitability on Wall Street right now, said Ingram, and when companies miss numbers, stock goes down. Businesses want to be in a position of predictability, and a general rule of thumb is to wait to go public until they can predict the next five quarters with a high probability of achieving it.

There isn't a lot of patience in the market, which can react "quickly and aggressively" when a company fails to deliver, Jamil said. In the private market, by comparison, companies have more flexibility to focus on growing market share without the pressures of meeting regular bottom-line benchmarks. It allows entrepreneurs and investors to focus on long-run growth.

But the incentives to go public eventually creep up.

The driving motivation is that trading on a public market allows investors to know the value of their investment in real time, according to Jason Paltrowitz, director of OTC Markets Group International and EVP of corporate services at OTC Markets Group, in an interview with CIO Dive. Trading on a public market also allows them to sell that security more easily.

All eyes on the ride shares ​

Uber and Lyft may not be business technology companies, but enterprise players are paying close attention to the ride share companies' IPOs for good reason.

In a race between two giants, there can be pressure on the smaller to come out first. Too much precedent could be set if the larger company beats out the smaller on an IPO, Shenk said.

Lyft is planning its investor roadshow for mid-March and is likely to IPO at the end of the month, according to the The Wall Street Journal. Sources told Reuters that the company expects a valuation between $20 billion to $25 billion, and that debuting earlier will prevent the company from being overshadowed by Uber, which still needs several weeks to prepare.

A successful launch by the major ride share companies could be indicative of the investor base's appetite for IPOs, Jamil said. There is a lot of money available, and those companies could create the momentum for more companies to jump in and participate. "That impact cannot be understated," he said.

On the flip side, if those companies perform below expectations, that could throw cold water on investors and companies looking to go public.

"We all know for tech that the highs can be very high, the lows can be low," he said. "There is volatility because these companies are at the cutting edge from a technology standpoint." It's easy for focus to drift to the high profile cases, but there is strength in numbers outside of those companies.

Many business leaders will want to watch the unicorns to see how their IPOs fare; some might worry about not getting as much spotlight and wait to file in the spring or after summer, Ingram said. Traditionally, companies don't price or go on roadshows between mid-June and Labor Day, so activity is bookended.

But there still is a lot of benefit to filing now: The market is relatively stable and earnings season has seen many well-performing reports from tech companies, Ingram said. The first window is now, and he expects strong filings in the coming months.

Don't rule out direct listings — but don't bank on them, either

Spotify turned the spotlight on direct listings last year, but despite the spectacle they are not a "cool, new thing," according to Paltrowitz.

Rumors that Slack is also considering the alternate route have put more attention on this method. But questions persist if Slack has enough brand recognition to pull it off too. Spotify was a household name, which worked in the company's favor. While Slack is well-known in business and tech settings, it does not have the same profile of the music streaming giant.

The traditional route makes sense if a company needs money, but if it doesn't, avoiding the IPO can save a business a big bill, Paltrowitz said. Companies that want a public market can use direct listings to give shareholders the public market price without all the money, time and effort of an IPO.

Companies have been doing direct listings on other markets for years; Spotify's was unusual because it was the first time someone did it on the exchange, he said.

If a big company like Slack also tries and is successful, it could lead more companies to examine the direct listing route, Paltrowitz said. Whether tech companies would be more inclined to this option is hard to say; the newsworthiness and flash of a company certainly plays in, and there are many "sexy" names in the technology space.

If shareholders and advisors see a strong case for direct listings, it can be beneficial for a company to go the alternate route. But it is less tried and tested than the IPO route, and Spotify certainly benefited from being the first.

Ingram sees direct listings are more of a one-off. A large purpose of the IPO is a coming-of-age and headline-grabbing, marketing play, which doesn't happen with a direct listing. It's a route for companies who think they don't need the banks, and involves a certain level of sophistication and sometimes even arrogance.

For most companies, "it really does make sense to pay a banker 7% of the gross proceeds and to get the benefits of the one-on-one investor shows and have everything basically cookie-cutter," he said. If companies follow the IPO path well, they'll raise just as much money, if not more.