In our last post, we looked at what it takes to go public today and whether or not predictions made following the dot-com bust have become a reality. Compared with our sample of Top 100 Software Companies, today’s tech IPOs are increasingly going public with at least $100m in revenue but are still not profitable.
It’s difficult to qualify this trend, but it’s worth asking: Does reaching $100m in revenue mean that these IPOs are performing better?
The answer seems to be no. In fact, it’s the tech companies that made less than $100m in revenue which are outperforming their larger peers, both in the first few months of trading and based on current returns. Clearly going public with less revenue is not the answer to a better-performing IPO, so what is it about these companies that makes them successful? How much does going public at an earlier stage play a part?
There’s one observation to be made here: Many of the sub-$100m in revenue companies are the ones investing in business and enterprise-class software (such as Jive, Imperva, Brightcove and more), while some of the larger revenue-making companies are extremely consumer-focused (e.g. Groupon, Zynga, etc.). This is an observation we’ve noted in a previous post too.
What are your thoughts about the data?