Editor's note: This is the first part of a series on the 2019 technology market outlook. Many companies plan IPOs this year, but quite a few will also be acquired. Stay tuned for the second part next week—the tech M&A outlook.

2018 was a good year for tech companies to go public, despite economic volatility and geopolitical uncertainty dampening activity in the fourth quarter.

According to Renaissance Capital, 30 more companies went public in 2018 compared with 2017, with proceeds rising 32% to $47 billion.

The tech sector remained hot, and companies benefited from a friendly investor base. Renaissance Capital data shows that more than 50 tech companies went public last year, accounting for over a quarter of all IPOs, with an average return of 2.2%.

Within tech, about 20 enterprise tech companies completed IPOs, including Dropbox, Carbon Black, Tenable, Pluralsight, and Elastic. Most performed successfully, cementing tech's status as one of the best-performing sectors.

Experts believe 2019 will be another strong year for tech IPOs. Private equity and venture capital continue to provide long-term support to companies in the private market, setting the stage for larger IPOs in the future.

Market anticipation of IPOs from well-known companies like Uber and Lyft creates both a wait-and-see atmosphere and opportunities for others. Unless the market slides again or geopolitical upheaval occurs, investors and tech companies are preparing for a busy year.

What to expect in 2019

According to Aftab Jamil, audit partner and global leader of technology at BDO, speaking with CIO Dive, the last "active" year for tech IPOs was 2014, when about 35 companies went public. Although 2018 saw relatively fewer, it was still a strong year compared with the slump of 2015 and 2016.

Renaissance Capital estimates that 60% of its 234-company watchlist are tech companies.

Consumer tech companies like Uber, Lyft, and Pinterest naturally draw significant attention, but big names in enterprise tech such as Palantir, Slack, CrowdStrike, CloudFlare, Big Switch Networks, Vertiv, and Rackspace are also in the spotlight.

Steve Ingram, national leader and partner of technology and life sciences at RSM, told CIO Dive that early filing activity shows a large number of companies in the sector hoping to go public this year. Six companies have already filed or indicated they will file in the first quarter.

The government shutdown at the start of the year limited the SEC's feedback to companies that had filed, delaying some listing plans. But with the government back in operation, experts expect a bumper year, despite lingering geopolitical tensions from 2018.

Ingram noted that if the market turns down again, companies may withdraw IPOs to avoid pricing in a downturn. IT and digital transformation services firm Valtech postponed its October IPO due to market conditions.

The economic outlook makes 2019 favorable for IPO considerations. Kurt Shenk, senior manager and senior tech analyst at RSM, told CIO Dive that the economy is in the late stage of the growth cycle, and although 2019 growth expectations are lower than 2018, experts still project 2.2% growth this year and 1.8% in 2020. Unemployment is at multi-decade lows, with some tech sector markets below 1%.

Private equity and venture capital extend the privatization cycle

Beyond favorable economic conditions, companies also benefit from ample capital supply. The active role of private equity and venture capital firms has changed when and at what scale companies go public. Jamil said tech is particularly in focus, with markets like software, SaaS, and cloud attracting substantial capital.

Jamil pointed out that between 2010 and 2012, companies took about six years on average to go public, but now that cycle has extended to an average of ten years, as private equity and venture capital provide easier access to large-scale capital.

Companies are staying private longer and growing larger, leading to an unprecedented number of unicorns in the market. This model has many advantages.

Ingram said Wall Street now has higher earnings expectations, and if companies miss them, their stock prices fall. Companies want to be in a predictable state and typically wait until they can forecast the next five quarters with high probability before going public.

The market lacks patience and reacts "quickly and violently" when companies miss targets, Jamil said. In contrast, in the private market, companies have greater flexibility to focus on expanding market share without the pressure of regular earnings, allowing entrepreneurs and investors to focus on long-term growth.

But the drive to go public eventually emerges. Jason Paltrowitz, executive vice president of corporate services and director of international business at OTC Markets Group, told CIO Dive that the main motivation for going public is to give investors real-time insight into the value of their investment and make it easier to sell securities.

Focus on ride-hailing companies

Uber and Lyft are not enterprise tech companies, but enterprise players are closely watching their IPOs. Shenk said that when two giants compete, the smaller one may rush to go public first, and if the larger one goes first, it could set a precedent.

According to The Wall Street Journal, Lyft plans to start its investor roadshow in mid-March and could go public by the end of the month. Sources told Reuters that Lyft's valuation is expected to be between $20 billion and $25 billion, and going public early could avoid being overshadowed by Uber, which still needs several weeks to prepare.

Jamil said the successful IPOs of major ride-hailing companies could reflect investor interest in IPOs. There is ample capital in the market, and these companies could drive more companies to participate. "Its impact cannot be underestimated," he said.

Conversely, if performance falls short of expectations, it could dampen enthusiasm among investors and prospective listing companies.

"The highs in tech can be very high, and the lows can be very low," he said. "These companies are at the technological frontier, so volatility is inevitable." People tend to focus on high-profile cases, but the collective strength of other companies should not be overlooked.

Ingram said many corporate leaders will watch the IPO performance of unicorns, and some may worry about insufficient attention and delay until after spring or summer. Traditionally, companies do not price or roadshow between mid-June and Labor Day, so activity is concentrated at both ends.

But there are still many benefits to filing now: the market is relatively stable, and tech companies are reporting strong earnings, Ingram said. The first window is now, and he expects strong filings in the coming months.

Direct listings: not to be ignored, but not to be relied upon

Spotify brought direct listings into the spotlight last year, but Paltrowitz believes it is not a "cool new thing." Reports that Slack is considering the approach have drawn more attention, but the question is whether Slack has enough brand recognition. Spotify is a household name, while Slack, though well known in the corporate world, is not as recognized as the music streaming giant.

Paltrowitz said traditional IPOs suit companies that need to raise capital; if they do not need funding, a direct listing can save significant costs. Through a direct listing, companies can give shareholders access to public market pricing without the time, money, and effort of an IPO.

Direct listings have precedents in other markets; Spotify's uniqueness lies in being the first to use this approach on the New York Stock Exchange.

Paltrowitz believes that if major companies like Slack try it and succeed, it could prompt more companies to consider direct listings. Whether tech companies are more inclined toward this approach is hard to say, but newsworthiness and visibility do play a role, and the tech sector has no shortage of "sexy" names.

If shareholders and advisors see a strong case for a direct listing, companies can benefit from the alternative path. But the approach is less mature than an IPO, and Spotify did benefit as the first.

Ingram sees direct listings as more of a one-off event. A key purpose of an IPO is the "rite of passage" and marketing effect, which direct listings lack. It is a choice for companies that believe they do not need investment banks, requiring a certain level of maturity or even arrogance.

For most companies, "paying an investment bank a 7% underwriting fee in exchange for one-on-one investor roadshows and a standardized process is reasonable," he said. If an IPO is executed well, the amount raised will not be less, and may even be more.