Venture-Backed IPOs Recovering but Weak: We Compare Results for San Francisco, Boston, Seattle, & San Diego
Amid an overall improvement in IPOs, a survey by Menlo Park, CA-based VentureDeal shows 21 venture-capital backed technology or life sciences companies went public in the U.S. during the first six months of 2010, raising a total of $1.9 billion in gross proceeds.
VentureDeal’s IPO activity report is focused on a specific subgroup of technology and life sciences companies backed by traditional venture capital firms, and draws from the firm’s venture capital database. Altogether, 63 companies went public during the first half of this year, according to the running tally on the Renaissance Capital website.
Since July 1, an additional 14 companies of all types have gone public, according to the Renaissance Capital tally—and VentureDeal says five of those are venture-backed tech or life sciences companies. While the overall number of IPOs so far this year is still just a fraction of the 675 U.S. companies that went public in 1996 (which was the IPO peak during the tech boom of the 1990s), the IPO market in 2010 has been on its best pace since 2007, when a total of 160 companies went public through initial stock offerings.
The numbers are obviously better than the first half of 2009, when only three venture-backed tech and life sciences companies held IPOs, raising slightly more than $462 million. (During the first half of last year, a grand total of 14 companies of all types sold shares of their stock to the public for the first time, according to the Renaissance Capital data.)
So what does it all mean?
“Last year was a heart attack,” says Don Jones, VentureDeal’s founder and CEO in an interview. “It’s really sort of a different world [now] because of the financial meltdown.”
The overall market for IPOs “seems to be opening up somewhat,” Jones says, “but the quality and performance of these companies is still weak.” Of the 21 venture-backed companies that went public during the first half of 2010, Jones says only five traded up since their IPO to show an increase in their share price, as of June 30. Those companies are Financial Engines (NASDAQ: FNGN) of Palo Alto, CA; ReachLocal (NASDAQ: RLOC) of Woodland Hills, CA; Ironwood Pharmaceuticals (NASDAQ: IRWD) of Cambridge, MA; SS&C Technhologies (NASDAQ: SSNC) of Windsor, CT; and Tesla Motors (NASDAQ: TSLA) of San Carlos, CA.
Jones also noted that a number of companies had to lower their share price to get the IPO out the door, which is not a good sign, and no venture-backed medical device companies have gone public since last year. “I’d call that worrisome,” he says.
Sorted by sector, the VentureDeal IPO activity report found six life science companies raised $491 million in gross proceeds; six Internet, digital media, and software companies raised a total of $612 million; and nine companies in the remaining sectors (semiconductors, wireless, mobile, financial services, and transportation) raised $799 million.
In my breakdown of the VentureDeal report for Xconomy cities, the San Francisco Bay Area had the most IPO activity (9), followed by Boston (2), Seattle (1) and San Diego (1). My city-by-city breakdown is here:
—Codexis (NASDAQ: CDXS) Redwood City; Biotechnology; $78 million
—QuinStreet (NASDAQ: QNST) Foster City; Digital Media; $150 million
—Financial Engines (NASDAQ: FNGN) Palo Alto; Financial Services; $127.2 million
—Meru Networks (NASDAQ: MERU) Sunnyvale; Networking; $65.8 million
—Calix Networks (NASDAQ: CALX) Petaluma; Networking; $81.9 million
—Anthera Pharmaceuticals (NASDAQ: ANTH) Hayward; Pharma; $42 million
—Alpha & Omega Semiconductor (NASDAQ: AOSL) Sunnyvale; Semiconductors; $91.5M
—Tesla Motors (NASDAQ: TSLA) San Carlos; Automotive; $226 million
—Telenav (NASDAQ: TNAV) Sunnyvale; Wireless; $56 million
—Aveo Pharmaceuticals (NASDAQ: AVEO) Cambridge; Pharma; $81 million
—Ironwood Pharmaceuticals (NASDAQ: IRWD) Cambridge; Pharma; $188 million
—Motricity (NASDAQ: MOTR) Bellevue; Mobile; $50 million
—MaxLinear (NYSE: MXL) Carlsbad; Semiconductors; $90 million