A digital photo printing service, an electro-medical equipment maker, a data storage software developer, a consumer-focused video technology maker, a maker of home diagnostic devices and an enterprise network performance software developer. If you’re looking for a single factor that connects the six VC-backed companies that went public in September, you won’t find it by looking at their business focus. Look instead at their financial statements. Five of the six companies have been profitable for at least a year, three of them (CommVault, Home Diagnostics and Shutterfly) for at least two years.
As discouraging as the IPO news was for the third quarter—when just eight venture-backed companies went public in what was the slowest quarter since 2003—VCs can take solace in the fact that the IPO window will always be open for new companies with solid financials. It bears repeating that Wall Street isn’t looking for a hot new sector with promises of future financial success. It wants profits now.
The addition of the six companies was welcome relief for the IPO Aftermarket Index. All six companies recorded a gain in their stock prices from their IPO price, with an average increase of 32% percent for the group. That drove up the overall performance of the Aftermarket to an average of 19%, up from just 8% at the close of the prior two months.—Lawrence Aragon