The next year will see the return of the tech IPO – or a period of negativity in the web startup business, according to one of the investors behind Pluck and Tribe.net.
Doing the math whilst speaking on a panel moderated by this site’s very own editor and publisher, Rafat Ali, Mayfield MD Allen Morgan said: “There has been a very poor market for IPOs in the US in the last four or five years … our industry didn’t fund any new companies from the second half of 2000 until 2003. It has always taken four to six years to build an independent company that can survive on its own [so] it should be a surprise if there were lots of companies going public [right now] – the oldest of them is [only] three or four years old. The test will be what happens this year or next – if the IPO market doesn’t return, it bodes ill for our business, which depends on a few outsized returns. It’s very rare you get an outsize return in an acquisition, you almost always have gotten big returns through the IPO process.”
Accel partner Judy Gibbon said: “IPOs are still attractive – it’s not on the horizon now but the market’s so [big] that we’ll stick with it.” All investors on the panel, which also included Philippe Collombel of DailyMotion backer Partech and Reed Elsevier Ventures MD Tony Askew, agreed media companies were looking for the next YouTube and that barriers to entry for new startups have been lowered – but Collombel said the bandwidth resources required for scalability still made it prohibitive to grow such a super-large service.
Rafat adds: Well, the panel didn’t turn out as I hoped…mainly my fault in how I opened the questioning, which was too negative, but that’s me. Also, too short a time (25 mins) to even start talking about the issues. Anyway, here was the list of question and issues I wanted to discuss:
— Media vs technology investment landscape: how are they converging?
— Investing in content: does it still bring the returns?
— What are media giants looking for in the companies they are acquiring?
— As the exits become quick and much earlier in the lifecycle than would have happened even three-to-four years ago, how are your investment strategies changing?
— What are your thoughts on the valuations and what factors should media companies be looking at when valuing a startup these days?
— What about the startup culture in UK and Europe…has it improved from Internet phase 1?