Tableau on the Run: IPO Underscores Seattle Big Data Leadership

5/20/13Follow @bromano

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Zillow went public in July 2011, at $20 a share. The online real estate marketplace has bounced up and down from there, but lately finds its shares trading in the high $50-range, valuing Zillow at around $2 billion. (An interesting side note, Tableau counts Zillow and a couple other local IPO prospects—Zulily and Big Fish Games—among its largest customers.)

Zillow didn’t exactly unlock a new wave of tech IPOs from the Northwest. And at least one prominent investor is skeptical that Tableau—or any other company—is poised to open the floodgates here or anywhere else anytime soon.

“When you say what’s the next big IPO, the brutal truth is I don’t know and I’m not sure there is going to be one for quite a while because the incentives are so strong to keep these companies private,” said Marc Andreessen, co-founder of venture capital firm Andreessen Horowitz, on CNBC’s “Closing Bell” last week.

His theory is that scar-tissue from the dot-com crash, as well as increasing regulations on public companies—such as Sarbanes-Oxley and Regulation FD—are making the IPO route less desirable to entrepreneurs.

“The new running theory among new entrepreneurs is never take your company public or don’t do it as long as you possibly can,” Andreessen said.

Others see the Tableau IPO as a potential opening of the public market for tech companies.

The Tableau offering—as well as the successful public stock launch of Marketo—come a year after Facebook’s less-than-stellar IPO.

Kathleen Smith of IPO research and advisory firm Renaissance Capital tells Investors Business Daily: “Tableau was the IPO that Facebook wishes it was. That served as the cathartic event for the IPO market.”

Greenwich, CT-based Renaissance Capital notes that marketing automation software company Marketo’s first-day gain of 78 percent on Friday was the best since Splunk—another big data company—gained 108 percent went it went public in April 2012. “With Tableau’s 64 percent pop, it was just the second time since 2000 (and the first time since 2010) that two companies produced first-day gains of more than 50% on the same day,” Renaissance notes in a blog post.

Over 10 years, Tableau has grown to more than 750 employees and $127.7 million in 2012 sales while taking a relatively modest amount of venture capital from New Enterprise Associates and Meritech Capital Partners.

With more than $40 million in cash on its balance sheet at the end of March, Tableau didn’t necessarily need the money from an IPO.

The offering raised $155 million for Tableau through the sale of 5 million shares at $31. The company plans to use the money to continue growing sales and marketing, among other general corporate purposes, and for possible acquisitions.

If there’s anything to cloud the first tech IPO from Seattle in almost two years, it’s that Tableau the company—as well as the co-founders who sold stock at $31—could clearly have reaped significantly more. Shares opened Friday at nearly $50.

The customers of the big Wall Street banks underwriting the IPO—including Goldman Sachs, Morgan Stanley, Credit Suisse, and JP Morgan—who bought at the offering price and sold early Friday morning reaped large, instant profits. About 3.1 million shares of Tableau changed hands before 10:30 a.m. EDT Friday.

The fact that shares have continued gaining today—even amid declines in the broader market—would seem to indicate Tableau could have gone public at a price significantly higher than $31 a share. Indeed, the company raised its IPO price range twice in the run-up to the offering, and ultimately priced its shares higher still.

A Tableau spokeswoman declined a request for comment on the pricing, citing Securities and Exchange Commission guidelines.

(Joe Nocera of The New York Times had a great column in March exploring the under-pricing of eToys’ IPO—exactly 14 years ago today—and the ongoing lawsuit brought by the bankrupt company’s creditors’ committee against Goldman, alleging the price was set artificially low.)

In any case, hundreds of Tableau employees are watching their company’s shares climb and feeling richer—at least on paper—thanks to millions of stock option grants awarded during the company’s hiring spree.

“A strong IPO will be a nice win for the employees, and the infusion of cash provides for sustained growth over time,” says Tim Porter, managing director at Madrona Venture Group, which has made several investments in big data companies. “In the long term, this will continue to bring more talent to Seattle, and create a new crop of entrepreneurs and angel investors. And it’s proof that smart, scrappy entrepreneurs can build long-lasting, standalone, super-successful companies right here in Seattle.”

Benjamin Romano is editor of Xconomy Seattle. Email him at bromano [at] xconomy.com. Follow @bromano

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