IPO VIEW-Software, services top 2011 hot IPOs -sources

Fri Mar 11, 2011 4:24pm EST

* Jive Software, Trustwave, Brightcove among possible IPOs

* Social media driving interests

* U.S. IPO activity tops $12.5 bln, highest since 2000

By Nadia Damouni

NEW YORK, March 11 (Reuters) - As investors impatiently await initial public offerings from LinkedIn, Groupon, Facebook and other hot Web start-ups, some lesser-known software technology companies are quietly positioning themselves to tap the public markets this year.

Companies such as Jive Software, Trustwave and Brightcove may not be household names, but their growth rates have soared over the last few years, paving the way to a possible public markets exit over the next few months, several people close to the discussions have said.

"Companies that focus on areas like social networking, cloud, virtualization, online content distribution and storage will be the leaders in attracting both public and strategic investor attention," said one top New York financial adviser, who focuses on technology.

With interest rates low, investors are willing to take more risk for the chance to earn higher returns.

The U.S. IPO market so far this year has raised $12.5 billion, six times what it had raised by this time last year, and the highest amount since 2000, according to Thomson Reuters data.

Some of the software IPO candidates are piggy-backing on the social media craze, by building their own technology platforms to connect people. One example is Service-now.com, which has publicly said it takes its inspiration from Facebook and Twitter by becoming a new kind of social information technology.

Service-now.com has more than doubled its revenue each year since its inception in 2004, CEO and founder Fred Luddy said. The company focuses on providing tech support through chat forums and live feeds to customers.

Luddy, who disclosed that its annual recurring revenue is approaching $100 million on improving operating margins, said, "In the coming years we aspire to pass a billion dollars per year in revenue."

Two sources with direct knowledge of the company's plan said Service-now.com is considered to be in the sweet spot of companies that will likely file to go public this year due to its exponential growth and revenues. The company took $7.5 million from JMI Equity in its first couple of years, but its strong growth has precluded the need to seek additional company funding, the CEO said.

In 2009, Sequoia Capital purchased shares from employees but none of this investment went to the company. "Our incredible momentum could carry the company through an IPO and we'll certainly entertain the idea when the time is right," Luddy said.

Another social business software company expected to go public this year is Jive Software, said two sources familiar with the discussions. All sources declined to be identified because they were not authorized to speak with the media.

Founded in 2001, Jive's CFO Bryan LeBlanc told Reuters on Thursday that the IPO market is hot right now and that his firm is watching the trend closely.

"We have not made concrete plans yet, we continue to evaluate all of our liquidity options but we recognize that being a public company gives you access to investments and access to capital to increase innovation and growth," LeBlanc said.

Although LeBlanc would not disclose the company's current revenues, Jive has completed three rounds of financing since 2007, totaling $57.7 million. Venture capital firms Sequoia Capital and Kleiner Perkins teamed up on the last round of financing to raise $30 million, marking the largest investment together since 1999, when they bought a combined $25 million stake in Google. This was five years before the search engine sold shares to the public.

Palo Alto Networks, the security software company, was also expected to be one of the hottest IPOs of 2011 until the company's CEO Lane Boss resigned in December, said two sources familiar with the situation.

With a potential multibillion-dollar offering, the Sunnyvale, California company had yet to sign up bookrunners to take it public, the sources said. A new CEO could be announced over the next few weeks, providing a good chance for an IPO later this year, said one of the sources.

Also in the data security market is fast-growing Chicago-based technology company Trustwave. The company has lined up its financial advisers to go public this year, which remain undisclosed, said several sources familiar with the discussions.

TrustWave had been solely funded by founders and angel investors prior to its first round of funding by FTVentures in 2004. The company has reportedly surpassed the $100 million revenue benchmark of companies ready to enter the public markets.

Another pressing IPO for 2011 is online video platform Brightcove, which has been eagerly expected to file for at least a year. The company is currently entertaining discussions from bankers over IPO strategies for 2011, said the sources. [ID:nN18266159]

A later year IPO could come from webcasting company On24, based in San Francisco, the sources said. After the March quarter the company is likely to pick a financial team to lead its offering, these sources said.

Trustwave declined to comment. Brightcove, Palo Alto Networks and On24 were not immediately reachable. (Reporting by Nadia Damouni; Editing by Kenneth Li, Gary Hill)

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