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 On Wednesday morning, Jeff Horing did something no venture capitalist had done for a long time -- he rang the New York Stock Exchange's opening bell."It was pretty fun -- I'd never done it before," says Horing, a co-founder and managing director at Insight Venture Partners. The firm backed SolarWinds Inc. (NYSE:SWI), a network management software company that launched its initial public offering Wednesday. As many have pointed out, it was the first IPO of a VC-backed company in the nine months since Rackspace Hosting Inc. (NYSE:RAX) went public. "We always knew [SolarWinds] was worth what we paid, but to see a third party validate that was gratifying," Horing says. Insight saw a return of roughly 4.5 times the $50 million it invested into SolarWinds. The IPO was followed Thursday by that of another venture-backed company OpenTable Inc. (NASDAQ:OPEN), an online restaurant reservation service whose shares shot up 60% in their first day of trading. (The Deal Pipeline subscribers can read more about OpenTable's and SolarWind's IPOs here.) Certainly, these offerings, taken with the five others that have launched so far this year, are good news for exit-minded private investors, though we note that both companies' first-day pops are eroding. SolarWinds' shares were down nearly 3% in early-afternoon trading Friday, at $13.43, and OpenTable's declined nearly 7%, to $29.79 each (OpenTable's share price could prove to be particularly volatile, as it only sold 3 million shares). Nonetheless, investment bankers are starting to notice the effect the steady trickle of initial offerings is having on private company execs. "Companies
are starting to entertain the notion of IPOs," says Jevan Anderson, a managing director at RBC Capital Markets.
"Three months ago there was never going to be another IPO, ever. Now it
doesn't seem as far-fetched." For Anderson, who tends to work with tech companies that are seeking a sale, this could mean his clients, armed with a potential alternative to M&A, could seek higher valuations from buyers who have had all the leverage in the recent past. As our former colleague Paul Bonanos points out in a GigaOm post, acquirers who have been waiting for the right moment to buy might start making their moves before private targets start flaunting the IPO option. For now, the only company that has set its IPO terms is Government Properties Income Trust, a REIT that set its IPO terms on May 20. The company, a wholly owned unit of publicly traded HRPT Properties Trust (NYSE:HRP), invests in properties that are majority leased to government tenants and is set to debut during the week of June 1. Some prominent VCs aren't waiting for the IPO window to open wide. Draper Fisher Jurvetson founder and managing director Tim Draper this week said he is developing a private exchange on which institutional investors and high-net-worth individuals can buy shares of private companies. But there is a decent pipeline of companies that have filed to go public, including Medidata Solutions Inc., a 10-year-old provider of on-demand software that manages clinical trial data for healthcare companies. If Medidata were to debut, it would certainly ring a bell for Insight Venture Partners. The New York firm is Medidata's largest stakeholder, with roughly 34% of the company. - Olaf de Senerpont Domis
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