Is The IPO Market Coming Back in 2010?

by Nathaniel Whittemore · 2009-12-24 13:17:00 UTC
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I write regularly about social venture funding, but social venture startups aren't the only type of companies that have seen a shift in the nature of exists and opportunities in the last few years. Next year, it seems more and more likely that the tech IPO (initial public offering) market is poised for a comeback.

For those who aren't running their own companies, "Exits" are the events such as an acquisition or a public stock offering (an IPO) at which point an investor in a company begins to see a return on their investment. The nature of exits available have a direct impact on the amount and type of funding available. For example, during the first dot-com boom, big IPOs meant that big investments from venture firms were a smart economic thing to do.

More recently, "exits" have been more about acquisitions by larger companies, such as Quicken's recent $170 million purchase of Mint.com. These exits offer lower returns (relatively speaking) for venture capital firms, which need massive (7-10x) returns to keep their model afloat. I don't think that these sort of returns are a bad thing, but they have had the effect of tempering VC money, and perhaps more detrimentally, influenced a younger generation of tech entrepreneurs to try to anticipate where larger companies are heading and build things that are useful to them (or their customers) rather than trying to take on a big problem and really create a disruptive innovation in their own right.

If only for that reason, I was excited to see TechCrunch's list of likely IPO candidates for 2010, which include big companies like Facebook, LinkedIn, and the awesome Etsy, which is a platform that gives artists and craftspeople their own custom store without the hassle of a merchant's license and web development fees.

If these companies do go public successfully, it could begin a shift in venture capital behavior and will almost certainly influence the way young companies imagine their trajectories.

Now if we can just solve the problem of social venture exits..

(Photo: jmanners)

Nathaniel Whittemore is the founder of Assetmap. Previously he was the founding director of the Northwestern University Center for Global Engagement.
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