bi-weekly column with timely,
relevant and possibly irreverent
insight into the BC technology
June 15th, 2007
Greenstone Venture Partners
IPO Dreams A
“Well you can do something,
If I could do anything-
Well can you do something out of this world?
Dreamer, you know you are a dreamer.”
– Supertramp, Dreamer
When venture capitalists go to bed at night, and their
dreams are good, they dream of the initial public
offering. Night sweats, sudden
awakenings and plain old nightmares come more often, so
it’s nice when a happy place is reached, soothing the
crusty buy-side vultures. Yes, the
IPO. Where riches are made and new
funds follow. Sure, the M&A route
has been very positive for
some of the investments. Look around
BC: Abatis, MDI,
Crystal Decisions to name a
few good acquisitions. But the IPO
is where the real money is: Aspreva,
Creo, Sierra Wireless,
Pivotal, Ballard, QLT, Angiotech
and Xantrex to name some
wrote last year about the AIM market in
England as a place where
some successful technology companies in
Canada were trying to
find a vibrant, liquid market to raise money and allow
shareholders to cash out. Since I
wrote about that, the AIM has cooled a little bit.
But the NASDAQ and TSX have heated up for
technology companies. In
Canada, the only
significant technology IPO for two whole years was
Sandvine (AIM listed).
But, as we will see in a minute, the tap seems to
have turned back on again for Canadian companies.
First, look to the
and its bellwether technology market, the NASDAQ.
From 2006 to 2007, the tech IPO registrations in
have more than doubled and a few notable
IPOs have left the barn and
done well. There are twenty
technology IPOs registered
so far in the second quarter on NASDAQ to go with the 24
from Q1. Compare that to 35 tech
IPOs in each of 2005 and
2006! Some recent successes are
Cavium Networks, a
semiconductor company, trading at $20 today after going
out May 2nd at $13.50 and Bigband
Networks going out in April at $13 and trading today at
$15.50. Just to give you an
appreciation of what the market is thinking…
Cavium did $34M in revenue
in 2006 and has a market capitalization of $821M today…
that’s 24x last year’s revenue.
Intel trades at 4x last year’s revenue.
In other words, Cavium
is getting pretty good multiples. The market likes their
quick scan of the US filings shows that most of these
company’s did $20-40M in revenue in fiscal 2006 and have
pretty good growth trajectories. The
exception is biotechnology and alternative energy
companies that have very little or no revenue and are
still getting market traction based on their potential.
Canada, after a death
valley of technology IPOs, I
scanned the SEDAR filings and came up with this list of
technology IPOs for the past
Raising $30M on $20M 2006 revenue
Genesis Worldwide - Just filed, had $20M in 2006 revenue
Raising $25M with $18M in 2006 revenue
Raising $40M with $30M in 2006 revenue
Wireless - Raising $10M with $7.2M in
Raising $30M with no revenue
Espial - Raising $25M with $10.6M in
Raising $20M (co-listing on
couple of these jump out at you if you are a Canadian
technology company growing to double digit millions of
Datacom Wireless out of
is a competitor to local success
Webtech enjoys a $190M
market capitalization on $16.3M trailing year revenue.
Datacom is going
public on the TSX with less than half the revenue.
They are only raising
$10M, but it still bears watching if you are doing
similar or higher revenue in your own company.
Espial just started trading last week and is
above its $7 IPO price. With just
$10.6M in trailing revenue, how were they big enough to
deserve a $72M market capitalization, or 7x revenue?
Their IPTV deployment and navigation solutions
have grown at 180% annual growth and will make up 100%
of their revenue going forward, so the growth story is
what sold, not their overall revenue which included old
Currently in our neighbourhood
there are a few companies that fit the bill already or
will soon as an IPO candidate, especially if these
desirable conditions hold up. It
might be time to talk to the bankers and see if your
company fits the bill.
course, in this frothy capital market, private equity is
still the biggest driver of shareholder liquidity.
Although the IPO may be the dream exit for your early
investors, the partial or complete buyout by private
equity firms is also very real today.
Technology companies have had a harder time
getting the attention of the private equity folks, but
that situation is also changing. I
talked about the dearth of investment capital at the
early stage a few weeks ago. I
suggested that the only short term fix for this was
successful exits to help attract US capital.
It seems the table is setting itself for some
near term successful exits, either through IPO, buyout
or the ever present M&A route. I
like BC’s chances of some near term exits.
It makes for nice dreams.
Let’s hope we see the results soon.
Letters From Last Time:
Judy Bishop and I have written about the e-mail overload
problem and it generated, well, a lot of e-mail.
I’d like to think it was productive use of the
technology to let me know what you thought of the issue.
I think that e-mail’s utility (we call it the
killer application of the Internet) is well established.
Like any technology it will grow and change to
meet new needs and new uses. But
most of you correctly said that, like anything
addictive, the user must consume it wisely and not
become a slave to it. Rather than
post the responses, I thought I’d end this meme with
these thoughts and move on.
What Do You Think? Talk Back To Brent Holliday
Something Ventured is a bi-weekly column designed
to supplement the T-Net British Columbia web site with
some timely, relevant and possibly irreverent insight
into the industry. I hope to share some of the
perspective and trends that I see in my role as a VC.
The column is always followed by feedback (if its
positive or constructive. I'll keep the flames to
Something Ventured Archive