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

4/22/11Follow @curtwoodward

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and airfare systems. He said Zillow has instead become “nothing more than real estate porn … merely looking to cash out its beleaguered venture investors, who have to date sunk $87 million into the business.” Ouch!

Another interesting feature of Zillow’s filing was the strong control being maintained by the co-founders, Rich Barton and Lloyd Frink. Although Zillow has indeed taken nearly $90 million from investors over its six or so years, Barton and Frink hold nearly 90 percent of the voting power. And even after going public, the founders will continue to control all of the Class B stock, special shares which give them 10-to-1 voting rights. In its SEC filing, Zillow acknowledged this structure could hurt its stock price, since Barton and Frink “together will be able to control all matters submitted to our shareholders for approval.”

“There’s an interesting trend here in these tech IPOs where the company is saying the founders know best, and that stockholders are in effect going to be in the passenger seat in the long-term management of the company,” Shapiro says. “With Google, everybody got comfortable with that and remains comfortable with that by all accounts, based on their stock price … Zillow is banking that they’re going to have the same reaction.”

But there’s a very big gulf between Google and Zillow. Entress chalks it up to the experience of the founders, who were also original figures at Bellevue, WA-based Expedia (NASDAQ: EXPE). “Rich Barton in particular is viewed as like the uber-entrepreneur in Seattle. So if anybody’s going to get away with it here in Seattle, it’s Rich,” Entress says.

If Zillow does meet its goals for this IPO filing, whatever those may be, it’ll be a success story in more ways than one. The company has certainly seen more than its share of rough markets in recent years, and the fact that it’s still around and appears headed toward profitability at some point is kind of remarkable on its own.

“Obviously Zillow’s really exciting now. But if you think about the fact that they’ve managed to become exciting in the midst of the biggest real estate apocalypse of our age, that’s pretty cool,” entrepreneur Tony Wright says. “There is that truism that a lot of the best companies are built in the worst times. A lot of the companies that are sort of hitting now started right after the first dot-com bust.”

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

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