Zillow’s IPO: As the Market Comes Back to Life, Is this Deal the Bellwether of a New Boom?

4/22/11Follow @curtwoodward

Trying to read too much significance into any single event in business can be a dicey proposition. But when we’re talking about a well-known Seattle tech company IPO—something the innovation community here hasn’t seen in quite a while—it’s worth chewing over what the development could say about the months and years ahead.

The IPO filing by online real-estate company Zillow earlier this week wasn’t a huge surprise—the company had been talking about taking the IPO plunge for months, and one of its chief competitors, San Francisco-based Trulia, has been pretty noisy about the same idea.

There were, however, some relatively odd notes to Zillow’s IPO. First of all, the company’s numbers are not mind-blowing: Zillow is not profitable, despite some hints to the contrary from executives last year, although its annual losses are narrowing. Revenues are growing, but the company’s 2010 haul was only about $30.5 million. Although it was never going to be a LinkedIn-size IPO, Zillow is still smaller than recent consumer-oriented tech companies that have either gone public (Zipcar) or filed the necessary paperwork to make it happen (Pandora).

So the fact that Zillow feels it can come out now looks like another bit of evidence that the market for tech companies is gaining heat, fed by the pent-up demand for deals building since the Great Recession and near-evaporation of the U.S. financial system.

“You probably wouldn’t have been able to do that, I think, a year or two ago with those numbers,” says Geoff Entress, a prominent angel investor and partner at Voyager Capital.

Zillow isn’t seeking that much money—about $52 million, far below what some tech companies are asking for as many see the IPO market gaining steam.

“It’s small, but I always remember when Adobe went public—it raised $6 million, and that’s a pretty decent company today,” says Bill Bryant, of Draper Fisher Jurvetson and Envision Ventures. “The objective is to increase the share price for all investors, and if you don’t need the money, you don’t need the money.”

Of course, one of the most watched things from the entrepreneur side is how much new money an IPO could wind up injecting into the local innovation scene. If Zillow pulls off this deal, it will bring in fresh capital from around the country it can use to expand locally, and it provides the possibility of liquid returns … Next Page »

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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