A New Path for Startups: Growth Under Large Corporations Before IPO

WATI editor

Jun 12, 2024

Startups are increasingly adopting a novel exit strategy called the "Swing-by IPO." This method involves initially accepting M&A, followed by aiming for an IPO later on.

This strategy allows startups to benefit from the resources and support of larger corporations, providing valuable collaboration opportunities. The "Swing-by IPO" offers a third alternative to the traditional IPO or straightforward M&A.

Inspired by a space exploration technique where a spacecraft uses a planet's gravity to accelerate, the "Swing-by IPO" concept signifies startups using the power of large corporations to boost their growth.

The term was coined in Japan, with Soracom as a notable example. Soracom, an IoT communication company, received a 20 billion yen investment from KDDI in 2017, leading to significant expansion before its IPO on the Tokyo Stock Exchange Growth market in March 2024.

The "Swing-by IPO" strikes a balance between traditional IPOs and M&As. It allows startups to leverage the resources and backing of large corporations while maintaining the potential for future independence through an IPO. This approach helps mitigate the issues of "small-scale IPOs," where startups go public too early and struggle due to inadequate growth strategies and funding.

This strategy is gaining traction, with other examples including Kammy, which secured substantial investment from Mitsubishi UFJ Bank, and dely, which expanded its business after receiving funding from Yahoo Japan.

However, for the Swing-by IPO to succeed, large corporations must respect the autonomy of startups and foster synergistic relationships. If executed well, the Swing-by IPO could become a prominent trend, solving the long-standing problems of small-scale IPOs and driving significant growth for startups.