The proverbial window for IPOs may be closing, but it's still open at least a crack. On Thursday, Chinese messaging service Weibo and Sabre Holdings, the parent of Travelocity, made their public debuts. At 91 so far, according to Renaissance Capital, the volume of IPOs in 2014 is more than double the pace of 2013 -- the biggest year for IPOs since 2000.
But as with a number of recent deals, including investment bank Moelis, Weibo and Sabre each sold fewer shares than expected, priced offerings below the expected range and struggled on their first day. (Shares of both Weibo and Sabre were up modestly in recent trading.)
it's hardly the stuff bubbles are made of, as I discuss in the accompanying video with Ben Horowitz, cofounder and general partner at Andreessen Horowitz, a venture capital firm that has founded more than 2300 companies and has over $4 billion under management.
"It's hard to see us in the bubble like we had in equities if we're not even back to [the year] 2000 in terms of the Nasdaq," Horowitz says, noting the index remains about 20% below its all-time peak. "Are there companies ahead of their valuations and performance? No question. But it was very different then, when we were in a bubble."
More important than the Nasdaq's level, Horowitz says, is the quality of the companies going public today -- at least compared with the IPOs of the dot.com era.
"In the old days, companies went public at a much younger stage," recalls the former CEO of Loudcloud, which went public in 2001. "Look at the financials [of today's IPOs]. They at least have big time revenue if not big time profits. The big difference is the businesses are working."
Horowitz, who declined to discuss the IPO prospects of his firm's specific portfolio companies, which include Box and Airbnb, says today's startups are more successful in part because:
- The Internet did change everything: "Investors tend to get overexcited but it's not a situation where people go 'the Internet is going to be huge' and it's way too early, which is what happened last time," he says, noting the size of the online audience has grown 50 times since 1999.
- The cost of doing business is down: "The cost structure [today] is more than 100 times cheaper so businesses and business ideas and concepts that didn't work before are working in a very real way."
Finally, the IPO market has been subdued in recent years "so a pickup is interesting but much more a reflection of how many high quality companies there are and have been created in last five years," he says.