Silicon Valley is on the verge of a new bout of Wall Street fever, as private technology companies rush to cash in on the first signs of stock market interest in initial public offerings for more than two years, according to venture capitalists.
Financiers are talking of public stock sales by tech companies at a level not seen since the 1990s – led by social networking company Facebook and a batch of other internet and “greentech” companies.
However, some experienced Valley financiers warn that most of the companies that have set their sights on Wall Street will never make it and will be forced instead to sell out to a larger company.
In two prominent sales of private internet companies in recent months, Zappos, the online retailer, was bought by Amazon for $850m, and AdMob, the leading mobile advertising network, was acquired by Google for $750m.
“Zappos was probably going to be the biggest IPO of the year in 2010,” said Chris Varelas, founder of Riverwood Capital, a private equity firm specialising in tech.
Hopes for a revival have been spurred by the strong rebound in technology shares since the spring, as well as the swelling ranks of large and profitable Silicon Valley firms, many of which have been forced to sit on the sidelines during the IPO drought.
“There have been a great number of these companies that have been baking under the covers,” said Faysal Sohail, a partner at CMEA Capital, a Valley venture capital firm. He estimated that up to 100 companies now have “hundreds of millions in revenue and profitability and are ready to file”.
“Our whole office is dealing with drafting meetings [to prepare the regulatory filings for companies to go public],” said one Silicon Valley investment banker.
Last month, the number of companies that filed their intention to go public with the Securities and Exchange Commission jumped to 31, the largest number since before the financial crisis.
“There’s a lot of assessment going on right now within portfolios about which companies might be ready to go next year,” said Craig Johnson, president of JMP Group, a small Silicon Valley investment bank.