From Nino to you!
Many Silicon Valley denizens have been waiting to see whether the mother of all Internet IPOs inspires a new wave of companies to go public. But by the time Facebook debuts, it may just be throwing gas on a growing IPO bonfire.
The first quarter of 2012 saw 20 tech companies go public. According to Dow Jones VentureSource, that was the most since the last quarter of 2007, when we had that little financial hiccup that almost sent our economy over a cliff.
And over the past month, things appear to have kicked up another notch. In a report from Renaissance Capital, the research firm said IPO debuts in April “put 2012 on a record pace for activity, with the most U.S. IPO pricings through April since 2000. The pace is 16 percent ahead of 2011 and appears to be accelerating, with 14 new deals added to the IPO calendar this past week alone.”
Silicon Valley got its own taste of this late last month when three local enterprise software companies — Infoblox, Proofpoint and Splunk — had IPOs that attracted big demand from investors.
Things are so hot, some are even uttering the b-word.
So should we be worried about things getting overheated? Nope, says Mark Heesen, president of the National Venture Capital Association.
Heesen was in Silicon Valley last week for the NVCA’s annual conference. While the revival of the IPO market had made venture capitalists more upbeat than he’d seen in several years, no one was ready to give
each other high-fives.
“The IPO market is not better, but it’s getting better,” Heesen said. “You’re starting to see more optimism in the venture community.”
Heesen says there are several reasons not to celebrate yet.
First, the big wave of IPOs echoed a similar trend last year. Big start to the year, followed by mild giddiness that good times were here again. Then came the third quarter when global economic concerns over European debt put the IPO market into a coma.
There’s a lingering fear that such a thing could happen again at any moment.
“We’re kind of riding that same roller coaster,” Heesen said. “We’re starting off nicely. We don’t want to see the wheels fall off the bus. Venture capitalists have become much more realistic about how much control they have over these things.”
There’s also a bit less exuberance this year because the number and value of mergers and acquisitions continued to decline in the first quarter. (Though that was before Instagram won the $1 billion Facebook lotto.) And the amount of venture capital raised by startups in the first quarter was down from the previous year.
Finally, there haven’t been any mega-IPOs of the Groupon-Zynga variety. Most of the companies going public so far this year have been smaller and midsize.
The amount raised in first-quarter IPOs was $1.4 billion, according to Dow Jones. By comparison, Facebook may be looking to raise $5 billion in its IPO.
“We didn’t see any billion-dollar IPOs during the first quarter,” said Lee Simmons, editor at Hoover’s, which researches and reports on the IPO markets. “But there is good reason to be cautiously optimistic for the rest of the year.”
That’s because IPOs so far this year have performed better than last year.
The stock market has not been gyrating as wildly as it did last year. And, of course, there is that looming Facebook IPO, which many are hoping will pave a road for all sorts of smaller tech companies to follow into the public markets.
VCs are certainly crossing their fingers.
It’s been a lean decade for an industry that has driven Silicon Valley for decades but has been contracting rapidly in recent years.
It’s an industry that I’m sure would welcome a return to boom times that could be unleashed by the Facebook IPO. But the way things have been in recent years, no doubt VCs are relieved just to have the IPO markets heading in the right direction.