| SAN FRANCISCO
SAN FRANCISCO Nov 8 For technology executives
weighing market flotations for Silicon Valley startups, this
week's gangbusters Twitter Inc initial public offering
sent a powerful signal: full speed ahead.
About a dozen private companies are valued at more than $1
billion, and many of them have already been holding informal
talks with bankers. Now, many - including Box, Square and Airbnb
- are likely to accelerate their IPO plans, according to venture
File-sharing company Box picked Morgan Stanley, Credit
Suisse and JP Morgan to lead its IPO, Reuters reported Friday.
The company has been valued at more than $1.2 billion by private
venture capital investors, but it remains unclear whether it is
Twitter's lack of profits proved to be no obstacle to the
micro-blogging site raising as much as $2.1 billion in its IPO.
Its current share price of around $41 gives it a market value
north of $22 billion.
That opens the door for other big-name private companies
including Square, the payments company founded by Twitter
co-founder Jack Dorsey, which has begun exploring the
possibility of an IPO next year, according to the Wall Street
Journal. Profits are not expected until 2015. Square declined to
Airbnb, an accommodation service, is also often cited as a
potential IPO candidate. "They don't have inventory and have
pretty low overhead," said analyst Michael Pachter, who believes
the company is profitable. The company declined to comment.
'SOME GUY ON MADISON AVENUE'
At Dropbox, a file-sharing service, Chief Executive Drew
Houston said in September that his company, valued at $4
billion, has cash left from a recent fundraising round and is in
no hurry to hold an IPO.
"I'm sure we'll go public at some point, but fortunately
it's not something we have to think about right now," Houston
said at a Techcrunch conference.
Social media service Pinterest, meanwhile, raised $225
million at a $3.8 billion valuation in October even though it
had only begun to make money in September by showing ads. Chief
Executive Ben Silbermann has consistently denied that the
company is considering an IPO.
Jeremy Liew, a partner at Lightspeed Venture Partners, which
invested in photo-messaging application Snapchat, said Twitter
was the latest company to prove to investors that social media
services can eventually turn their mass audiences into reliable
revenue sources, even if they have yet to turn a profit.
"Once you touch that many people, you will always figure out
ways to make money," Liew said. "After you enter the popular
consciousness, there'll be some guy on Madison Avenue asking,
'What's our Twitter strategy? What's our Tumblr strategy? What's
our Facebook strategy? What's our Snapchat Strategy?'"
Snapchat is perhaps one of the furthest down the line. It
raised $60 million earlier this year at a valuation of $800
million. A Pew Research Center study released last month said
that 9 percent of U.S. mobile phone users use Snapchat.
Notetaking service Evernote, which has been valued at $1
billion, has signaled for several months that it is beginning to
mull an IPO, although CEO Phil Libin said an offering would
still be at least two years away.
"There is no scenario in which we go public this year or
next year," said Libin, noting that the company would probably
raise more money in the private market before floating shares.
"I don't think we're at a point yet where we are the best
company we can be to go public," he said in an interview, noting
that predictable and balanced revenue streams would have to be
precursors to any IPO.
The company, which has more than 80 million users and
generates revenue from selling a $5 a month premium version of
its app as well as a version for businesses, is "educating"
itself about how to become IPO-ready by talking to bankers and
other CEOs, including Twitter's Dick Costolo and Microsoft's
Steve Ballmer, said Libin.
The market's embrace of Twitter comes right as the IPO
market enters what is typically a seasonal lull. Public
offerings typically come to a halt around the time of the
Thanksgiving holiday and do not really get started again until
February or March.
Kevin Hartz, a serial entrepreneur and investor who founded
Xoom, a digital money transfer service that went public in
February, said many in Silicon Valley believe the appetite is
growing for tech IPOs.
"The question entrepreneurs ask is where can you get
inexpensive capital?" Hartz said. "For years private valuations
were higher than public valuations. But over the past couple
quarters that disparity has changed."
Google Ventures partner Wesley Chan said the Twitter IPO
shows that there is an appetite for exciting consumer Web
companies which may not have fully developed business
That may prompt other similar companies to try to rush to
market to take advantage of the current climate, though he noted
that is not something he would advise his companies to do.
"You never want to be in a situation where the market
rewards you based only on momentum," he said.