For a company to go public through a direct listing successfully, conventional wisdom says it needs to have a big brand that consumers recognize and every investor knows. Spotify and Slack could go that route because they didn't need bankers to explain their stories to money managers.
But some big-name venture capitalists are trying to get other types of companies to consider the possibility of bypassing the traditional IPO and selling their existing shares to investors directly.
At an event on Tuesday in San Francisco for about 100 CEOs of late-stage start-ups and another 200 people in the tech investing universe, Benchmark's Bill Gurley said many more companies should start considering direct listings, rather than going the traditional IPO route.
Gurley, a former board member of Uber, has criticized IPO bankers for pricing offerings too low, leading to a first-day "pop" that makes money for early buyers at the expense of the companies selling the shares. Tuesday's event, Direct Listings: A Simpler and Superior Alternative to the IPO, was by invitation only and closed to the press.
One audience member who got the message loud and clear was Manny Medina, the CEO of Outreach, a Seattle-based company whose software is designed to help salespeople track and stay in touch with customers. Outreach is far from a household name, but Medina said it's a high-growth company with the public market in its sights.
"I don't need introductions to funds," said Medina, noting that big investment firm Lone Pine Capital is already a backer, and firms like Wellington, T. Rowe Price and Fidelity have talked to the company at some point during its private fundraising efforts. "And we sell to enterprise customers, so the discovery process is a lot less obscure than it used to be."
Barry McCarthy, Spotify's CFO and the architect of the music company's direct listing last year, spoke first about how his company handled the direct listing.
Medina is well aware that Outreach has nowhere near that kind of brand recognition, but the event convinced him it might not matter.
"Direct listings I always thought of as this mythical animal," said Medina, who came in from Seattle just for the one-day event. "The point is that the bar is not that high anymore."
It's still very early and the market has hardly been tested. Spotify and Slack are both trading well below their debut prices, so even though the companies avoided leaving money on the table, they haven't generated the kind of continued excitement of a Zoom or CrowdStrike, which have surged since their IPOs.
Tech giant Airbnb is leaning towards a direct listing, but other investors who spoke to CNBC at Tuesday's event said almost all of the late-stage companies in their portfolios are still planning for a traditional IPO.
Correction: An earlier version of this story included the incorrect name of an Outreach investor. It's Lone Pine Capital.