Better, But Still Not Great

While the Dark Ages of IPO market stagnation ended this spring, the Renaissance has not yet arrived.

Instead, the climate for new offerings remained sluggish in August and the first half of September, with a handful of venture-backed companies making market debuts or filing for IPOs. While those who went public this past year have mostly performed well in aftermarket trading, their solid showing has yet to usher in a sizeable crop of new entrants.

Still, year-over-year, 2009 is shaping up as far more profitable for venture and private equity investors than 2008. VCs broke a long dry spell for pharmaceutical companies in August with the IPO of Cumberland Pharmaceuticals (Nasdaq: CPIX). The Nashville-based company was the first venture-backed offering in the life sciences sector since the first quarter of 2008.

Private equity investors also did well with the August debuts of Avago Technologies, a semiconductor products maker that spun out of Agilent Technologies, and Emdeon, a developer of software linking health care providers and insurers. Avago raised $648 million, while Emdeon pulled in $367 million.

“The positive reception of these and other deals, along with a refreshed pipeline of companies waiting to come to market, hints at a recovery in the IPO space and the possibility of an active end to 2009,” wrote analysts at IPO research firm Renaissance Capital.

Forty-six companies have gone public this year (as of mid-September), including 32 in the third quarter, according to Renaissance. On the venture front, there have been a total of seven VC-backed IPOs, up from six for all of 2008.

Venture-backed filings come from a range of sectors, covering everything from consumer retail to network security. Most are seeking to raise $100 million or more in their IPOs.

September’s filings included one from Rue21, a Warrendale, Penn.-based youth clothing retailer, which plans to raise $125 million via an IPO of common stock. Apax Partners holds a 63.4% ownership stake, while BNP Paribas holds a 23.6% stake.

Also in September, Gain Capital Holdings, operator of the retail foreign exchange trading service, filed for a $125 million IPO on the Nasdaq. The Bedminster, N.J.-based company has raised around $175 million in VC funding since 1999 from 3i Group, Blue Rock Capital, Cross Atlantic Capital, Edison Venture Fund, Tudor Ventures, VantagePoint Venture Partners and others.

August was also a reasonably busy period for new filings. Fortinet, a Sunnyvale, Calif.-based network security provider, filed for a $100 million IPO, with Morgan Stanley as lead underwriter. The company has raised about $83 million in VC funding since 2002 from Acorn Campus Ventures, DCM, Defta Partners, Meritech Capital Partners, Redpoint Ventures and WI Harper Group.

And Archipelago Learning, a Dallas-based provider of online education tools and services, filed for a $75 million IPO. Its is majority-owned by Providence Equity Partners.

Later stage investors are also looking for return-on-investment from, a Provo, Utah-based site for researching family history that filed for a $75 million IPO. Its shareholders include Crosslink Capital, Spectrum Equity Investors and W Capital Partners. A predecessor company had raised around $50 million in VC funding between 1998 and 1999, but none of those backers are listed as existing shareholders.