Optimism Remains Heading Into Q2

The first quarter of the year brought a level of venture-backed IPO action not seen since 2007, with 14 companies launching public offerings and raising a total of $1.4 billion.

So far, the second quarter is getting off to a slower start.

There was just one venture-backed offering in the first half of April, from car-sharing service Zipcar, and just two new filings (as of April 18, just before VCJ’s deadline), from Beijing-based Internet service provider 21ViaNet and real estate website Zillow.

Yet optimism in venture capital circles continues to run strong. Among attendees of this year’s National Venture Capital Association conference, the party line was one of improving IPO fortunes, with hopes that the pace of new offerings and registrations, stuck in slow gear for the moment, will soon find its momentum.

“Ideally we would like to see a 20 to 30 percent increase of U.S. venture-backed companies going public this year,” says NVCA President Mark Heesen. “Market signs currently suggest that this is a reasonable goal.”

Certainly the strong first-day performance of Zipcar (NYSE: ZIP) boded well for others in the IPO pipeline. Shares of the Cambridge, Mass.-based company soared in first-day trading, closing up 56% at $28. The company priced its 9.7 million share offering at $18 per share, above the anticipated range of $14 to $16.

Zipcar, which operates a fleet of self-service cars in 14 metropolitan regions nationwide, says it plans to use the money to pay down debt and expand its business. The company, which posted a $14 million loss last year, has raised about $60 million in venture funding to date.

Ideally we would like to see a 20 to 30 percent increase of U.S. venture-backed companies going public this year. Market signs currently suggest that this is a reasonable goal.

Mark HeesenPresidentNVCA

Its largest shareholders include Revolution Living, the funding arm of AOL’s Steve Case, and which owns about a 21.5% pre-IPO stake. The next largest shareholders are Benchmark Capital (11.9%), Norway-based Smedvig Capital (7%) and Greylock Partners (6.7%).

The IPO success also provides Zipcar some competitive edge in what’s becoming an increasingly crowded field of car-sharing startups. Rival services that have raised funding recently include San Francisco.-based RelayRides, backed by August Capital and Google Ventures; Spride, which was co-founded by Sunil Paul, founding partner at early-stage investment firm Spring Ventures; and Getaround, now in Beta testing.

Venture investors also benefited from the strong debut of Qihoo 360 Technology in late March.

The Beijing-based provider of mobile and Internet security products raised $175.6 million in its March 30 debut. Shares of Qihoo (NYSE: QIHU) soared 134.5% in first-day trading, giving the company a market capitalization of well over $3 billion. Qihoo shareholders include Highland Capital Partners (pre-IPO stake of 17.7%), Sequoia Capital (9.5%), Trustbridge Partners (5.2%) and Redpoint Ventures (5%).

VCs are also anticipating a good exit from another Beijing-based investment, 21ViaNet. The company, which provides data center services, has raised at least $65 million from such backers as GGV Capital (pre-IPO stake of 11%), Matrix Partners (8.2%) and Meritech Capital (6.9%).

One other new registrant last month was real estate website Zillow, which filed for a $51.8 million IPO. The Seattle-based company has raised $84 million in venture funding, according to Thomson Reuters (publisher of VCJ). Shareholders include TCV Funds (29.9% pre-IPO stake), Benchmark Capital (19% stake) and PAR Investment Partners (11.1%).