All eyes are on Twilio this week to see how the market reacts to the first U.S. venture-backed tech IPO of 2016.
Not since Square's debut in November has a domestic technology company fueled by venture capitalists tested the public markets. Cloud software developer Twilio is scheduled to sell shares on Wednesday night and start trading the following day on the New York Stock Exchange.
The drought is being felt across the start-up landscape because emerging software and internet companies count on IPOs to produce returns that investors can plunge back into the ecosystem. From 2001 to 2015, an average of 37 tech companies went public each year, according to data from Jay Ritter, a finance professor at the University of Florida and an IPO expert.
"Everybody in the VC world will be paying attention," said Mamoon Hamid, a partner at venture firm Social Capital in Palo Alto, California. "It's a billion-dollar software company, and it has implications on the broader tech IPO landscape."
Twilio said in its updated IPO prospectus last week that it plans to sell 11.5 million shares at a preliminary range of $12 to $14, placing its market capitalization as high as $1.15 billion. The company's last private investors paid $11.31 a share in 2015.
San Francisco-based Twilio has grown rapidly — 88 percent last year — by selling software that helps companies communicate with their customers using voice, video and messaging in anonymized fashion. For example, OpenTable uses Twilio to send reservation notifications, while the technology lets Nordstrom salespeople chat with customers who are waiting for a specific product to arrive.
Uber is also a big client. The ride-hailing company facilitates one-on-one conversations between drivers and riders without divulging personal phone numbers. Airbnb does the same for hosts and guests.