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.