A friend of mine who is a partner at one of the Big 4 public accounting firms tells me that there are perhaps forty Silicon Valley venture-backed technology companies lining up to file for their IPO's. By "lining up to file" he means these companies have selected their investment bankers and other advisers and have at least held their "organizational meeting" - this is the formal kick off to the process. The first visible public step is the filing of the company's registration statement (the "S-1") with the SEC, usually a month or so after the org meeting.
As if to prove the point one of these filed last week - Financial Engines out of Palo Alto, looking to raise $100m to finance growth at their $50m annual revenue business. If you want to keep an eye on these companies and see who's filed, who's about to price (actually start trading) and so on then go to Hoover's free site (you can also sign up for their weekly email update).
Forty is a phenomenal number and, if these companies complete the process which itself may take a couple of months or more, indicates a boom IPO period in the first half of next year. In context, in 2008 there were only 6 venture-backed IPO's and only 8 through Q3 in 2009. What's more, many (but not all) are substantial businesses, profitable and high caliber.
Some will not complete the process. Many "dual-track", meaning they are using the IPO process to also bring potential acquirers out of the woodwork looking to buy the business before it gets too expensive as a public company. Others will fall by the wayside for various reasons, including probably those who will find the deluge results in investor fatigue. And all this of course assumes the market really has sufficient capital ready to pile in (more correctly, this is a psychological rather than physical hurdle)
But lets suppose the majority do complete the process. What are the implications? Well, some of the capital raised certainly makes it's way back into the startup ecosystem via angels, VC's and others. Some of it will percolate back into the broader Valley economy - buying houses, cars and so on. And - most importantly from my point of view - there will be a substantial change in the philosophy of the typical venture investor. Remember my post of July 9th? Silicon Alley Insider had just published a report that noted that the thing that worried most VC's was "Exit Markets - when will they return?"
Well, suddenly the entire picture changes, doesn't it? What you can be pretty sure of is that if there is a barrage of exits then the investor mood will shift dramatically - and hopefully in favour of substantially increased investment in Valley startups! We can certainly hope so!
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