Uber and Airbnb will eventually — it is widely assumed — have massive IPOs. In the meantime, big banks are salivating at the hundreds of millions of dollars in fees those offerings will produce.
That helps explain why the two most highly-valued U.S. venture-backed companies are raising billions in debt, even though they've raised mountains of equity.
Tech eras are defined by one or two companies. Miss out on Microsoft in the 1980s, Amazon.com in the 90's, Google last decade or Facebook four years ago and banks not only lose the IPO fees, but they face an uphill battle getting into secondary offerings, mergers and acquisitions and all sorts of other advisory work.
And then there's wealth management: Think how much cash early Uber employees will some day to stash away in various hedge funds.
"It's smart business to underwrite an inexpensive debt deal at this point to make sure they're locked in," said Scott Orn, chief operating officer of Kruze Consulting, a firm that provides financial services to start-ups. "They're effectively trying to buy the IPO business."
Orn was previously a partner at venture debt firm Lighthouse Capital. He said that outside of the most prosperous venture-backed companies, debt is getting harder, with banks tightening their lending terms.
Uber and Airbnb are the exceptions.