The current market climate does not bode well for public offerings from any other sector but healthcare. Yet technology was once the darling of the market, and it electrified investors and underwriters alike. However, those hoping for a second coming will need to wait at least another year, according to executives at private companies.
A survey of executives at the Private Technology CEO Summit, conducted by RBC Capital Markets, revealed that companies looking to go public won’t see a return to normal IPO levels for 12 months. In fact, 70% don’t predict a rebound until at least the third or fourth quarter of 2002.
Two hundred and fifty venture capitalists, portfolio managers and executives from private technology firms participated in the survey.
Internet security and wireless technologies were cited as the two top sub-sectors for technology investors over the next two years. Biotechnology was third.
Interestingly, 42% of those surveyed were not looking for a public offering, but responded that they were seeking a merger & acquisition partner, and 23% said they would remain independent.
Moreover, profitability appears to be the key buzzword among VCs and investors. In fact, survey respondents favored profitability as the most important issue for firms by a two-to-one margin when compared to revenue growth. Yet more than 90% of company executives responded that their companies had not yet reached the profitability threshold. Seventy percent expect to be profitable within 16 to 18 months.
“Although the IPO market is soft now, the companies in the pipeline that have strong fundamentals are much further along in their development than we have seen in the last three years,” said Bob Reynolds, co-head of RBC Capital Markets technology.
RBC Capital Markets is the corporate and investment arm of the Royal Bank of Canada (NYSE:RY).
Colleen O’Connor can be contacted at:Colleen.Oconnor@tfn.com