IPO Pipeline Building But Quality is Falling

As we go into the final stretch this year, the IPO pipeline is building, but their valuations are sinking. TechCrunch reports 67 deals entered the pipeline since July, and so far this year the first nine months were up over the same period in 2009. IPOs were up to 32 in Q3 from 20 in Q3 a year earlier, but the size was down, with one over $500M. The WSJ gives more data on the pipeline, looking at 49 venture-backed IPO candidates:

  • 9 of them are retreads, taking their second shot at going out, which the Journal notes is but “a small fraction of the group that previously cancelled their IPOs.”
  • Only 11 of them are above $100M revenue
  • Only 16 were profitable in 2009
  • Only 1 well-known social media winner is going out – Demand Media

This is not a very compelling distribution, and it is also a bit skewed by two outliers (see charts). It appears we will have to wait for the balance of social media winners (Facebook, Twitter, Zynga, LikedIn) to spark a revival of IPOs.

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About Duncan Davidson 228 Articles

Affiliation: NetService Ventures

Duncan is an advisor to NetService Ventures, where he focuses on digital media and the mobile Internet.

Previously he was at four start-ups: Xumii, a mobile social service based on a Social Addressbook; SkyPilot Networks, the performance leader of wireless mesh systems for last-mile access, where he was the founding CEO; Covad Communications (Amex: DVW, $9B market cap at the peak), the leading independent DSL access provider, where he was the founding Chairman; InterTrust Technologies ($9B market cap at the peak), the pioneer in digital rights management technologies, now owned by Sony and Philips, where he was SVP Business Development and the pitchman for the IPO.

Before these ventures, Duncan was a partner at Cambridge Venture Partners, an early-stage venture firm, and managing partner of Gemini McKenna, a joint venture between Regis McKenna's marketing firm and Gemini Consulting, the global management consulting arm of Cap Gemini.

He serves on the board or is an adviser to Aggregate Knowledge (content discovery), Livescribe (digital pen), AllVoices (citizen journalism), Xumii (mobile social addressbook), Verismo (Internet settop box), and Widevine (DRM for IPTV).

Visit: Duncan Davidson's Blogs

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