ServiceTitan's IPO: Driven by Compounding Ratchet, Not Open Market
ServiceTitan's recent IPO filing suggests a forced move due to a "compounding IPO ratchet structure" in its Series H funding round, rather than an improving market. This structure compels the company to compensate investors if the IPO price falls below the Series H share price, with increasing penalties for each delayed quarter. Read more about ServiceTitan's IPO.
The Compounding Ratchet
This unusual term requires ServiceTitan to issue additional shares to Series H investors for every quarter the IPO is delayed past a set deadline. With the current share price and growth rate, ServiceTitan needs a high IPO price to avoid further dilution. Explore recent startup funding trends.
Down Rounds vs. Risky Terms
While some criticize such terms as "dirty," they represent a calculated risk by founders to avoid down rounds. However, these tactics delay the inevitable and can lead to forced IPOs. Learn more about founder strategies.
IPO Window Remains Closed
ServiceTitan's situation highlights the challenges faced by late-stage companies struggling to maintain valuations. This forced IPO doesn't signal an open market but rather a consequence of unfavorable funding terms. The success of this IPO remains uncertain, with some financiers skeptical about its potential impact on the market.