Last exits?

Happy New Year. There was a useful post in regarding 2007 technology IPOs. Some of these are outside the scope of this column, but what I found interesting was that it seems that enterprise software companies were able to tap the capital markets at levels of revenue and profitability unseen over the last few years. A couple of years back the message from investment bankers was that you needed quarterly revenues of not less than USD20 million (and preferably more) and several quarters of profitability before even considering an IPO. Yet Netezza’s IPO got away OK despite a lack of profitability (though strong growth), while Sourcefire had quarterly revenue of under USD 15M and was still not profitable, yet also managed an IPO. It looks as if the markets have taken a slightly harder view since then judging by the early performance of these shares, but these IPOs would simply not have happened in 2004 or 2005.

What is less clear is whether 2008 will show the same softening of view, or whether the financial debt crisis afflicting banks will have collateral damage in the IPO market. Software companies and their backers will be hoping for a continued thaw rather than a return to the wintry outlook the capital markets have seen in the past few years.