100 tech IPOs in 2010?

Bambi Francisco Roizen · January 6, 2010 · Short URL: https://vator.tv/n/cd0

Scale Venture Partners Sharon Wienbar gives a bullish outlook on the exit market this year

After a brutal 2009, this year looks to be more promising for venture capitalists. About $12.2 billion was invested in startups during the first three months of the year, down from $22 billion from the same period a year ago, according to PricewaterhouseCoopers/National Venture Capital Association.

But by the latter part of the year, a lot more deals were done. Zynga raised $180 million, Chegg raised $57 million, Playdom raised $43 million, Quidsi (parent of Diapers.com) raised $30 million, and exits were looking up as M&A accelerated. For instance, Google bought AdMob for $750 million, Adobe bought Omniture for $1.8 billion and Cisco bought ScanSafe for $183 million.  

The last two acquisitions were of Scale Venture portfolio companies, Omniture and Scansafe. Those are nice liquidity events to help Scale's investors feel confident in putting more money to work at Scale for perhaps a new fund. Not surprisingly, Sharon Wienbar, venture capitalist at Scale Ventures, is very optimistic about 2010.

In fact, she's getting frequent calls from investment bankers - a good sign that the public market investors are starving for fast-growing companies.


"Bankers are saying there could be more than 100 tech IPOs in 2010," said Sharon, in this segment of our three-part interview series.

Here are some highlights:

- The current level of VC fundraising and investments - while down - is actually healthy for the industry. VC investing as a percent of GDP is about half a percent of GDP, which is a long-term typical average. During the bubble years, it was about 2%. So, the industry is rightsizing itself. What this means is more opportunity for companies to grow their businesses rather than spend money trying to beat out competitors.

- Companies grew really nicely in 2009, making VCs feel bullish again. For example, Hubspot (which raised $16 million in October, led by Scale) has seen revenue more than triple in 2009. Secular trends are outpacing the cyclical decline in the economy.

- Some Scale companies positioned to be IPO candidates this year are Waterfront Media, mBlox and Reply.com

- It's unclear whether public market investors will embrace IPOs that are not profitable. For instance, ReachLocal, which just filed for an IPO, has generated $143 million in the first nine months of this year, but is not profitable.

- Public market investors appear to want high-growth companies. But reception of ReachLocal will be a good indicator. Right now, only 25 companies in the Nasdaq are growing at 20% annually. Their multiples are pretty low (12x EBITDA). This is not typically considered a growth company. To this end, demand for higher-growth companies (50% revenue growth) may increase in 2010. This will bode well for the later-stage companies growing revenue quickly, but with little or no earnings.

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Bambi Francisco Roizen

Founder and CEO of Vator, a media and research firm for entrepreneurs and investors; Managing Director of Vator Health Fund; Co-Founder of Invent Health; Author and award-winning journalist.

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Scale Venture Partners

Angel group/VC

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Scale Venture Partners chooses markets for investment based on our insights into trends drawn from primary research with incumbents, customers, competitors and our network of experts. We select companies we think are going after something great.

Our investment strategy makes "scale" relevant to you for two reasons. We operate in markets where you can create large scale success. We work side by side with you to help scale your business to reach its market potential.

Most of our investments are mid to late stage, when the software is being used, the chip is in the fab, and the therapy is being tested on humans. It may still feel early to you. You may be just starting to build out your go-to-market team. It's at this stage that our own practical operating experience drives the best rewards.



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Zynga is the largest social gaming company with 8.5 million daily users and 45 million monthly users.  Zynga’s games are available on Facebook, MySpace, Bebo, Hi5, Friendster, Yahoo! and the iPhone, and include Texas Hold’Em Poker, Mafia Wars, YoVille, Vampires, Street Racing, Scramble and Word Twist.  The company is funded by Kleiner Perkins Caufield & Byers, IVP, Union Square Ventures, Foundry Group, Avalon Ventures, Pilot Group, Reid Hoffman and Peter Thiel.  Zynga is headquartered at the Chip Factory in San Francisco.  For more information, please visit www.zynga.com.



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HubSpot is an inbound marketing system that helps your company get found online, generate more inbound prospects and convert a higher percentage of them into leads and customers. HubSpot helps companies get found by more prospects using search engine optimization and marketing, leveraging blogs and the blogosphere and engaging in online social media. By using landing pages, lead intelligence and marketing analytics, HubSpot customers convert more prospects into leads and customers. Based in Cambridge MA, HubSpot Internet marketing can be found at www.HubSpot.com and the Website Grader free SEO tool is available at www.WebsiteGrader.com.


Sharon Wienbar

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Sharon invests in Mobile and Internet companies at ScaleVP. She sits on the boards of Actiance, BeachMint, Everyday Health, PlayPhone, Reply.com and uTest.