Over a year and a half ago, I did a two-part blog post on the East Coast IPO malaise - one focused on Boston (Massachusetts more broadly), another focused on New York. In these two posts, I expressed optimism that there was a strong pipeline of companies that would result in public offerings if the macroeconomic environment was stable enough. And in assessing the two markets, my conclusion was that the New York market had a stronger pipeline of pre-IPO companies that would be attractive to the public markets than Boston.
On the heels of the successful Kayak IPO, I thought I would do a retrospective look back. In doing so, I realize I was dead wrong. In the last 18 months, Boston has produced far more IPOs than New York, and the remaining pipeline in Boston seems to be quite strong (see Boston Business Journal's IPO Watch), arguably stronger than New York for the next 6-12 month window.
There have been eleven Boston-based technology IPOs since my blog post, including: Brightcove ($430M market cap), Carbonite ($240M), Demandware ($740M), EXA ($130M), Kayak ($1.2B), Merrimack Pharma ($730M), Synageva Biopharma ($1.2B), Tesaro ($360M), TripAdvisor ($6.0B), Verastem ($210M) and Zipcar ($730M). A few of Boston-based the companies that I highlighted as potential IPO candidates in 2011-2012 have chosen to sell instead, including Endeca ($1.1B, Oracle), Kiva ($775M, Amazon) and ITA ($700M, Google).
Meanwhile, not a single New York technology IPO has taken place. Maybe I'm mistaken, but in reviewing the data, I couldn't find a single one. There was one big exit from my list of NY IPO candidates - Buddy Media ($700M, Salesforce.com) - but no others.
11-0 in IPOs and 3-1 in big M&A in favor of Boston? What's going on here? Is this a law of small numbers or a fundamental issue?
I'm not sure of the answer, but a few theories have surfaced as I talk to others:
- The IPO culture hasn't fully permeated NYC? There are only very few public technology companies based in NYC: I count AOL as the only one with >1 billion market capitalization, whereas Boston has 30-35 innovation economy companies with greater than >1 billion market capitalization. Perhaps Boston CEOs, CFOs and boards feel more pressure to go public sooner and/or are comfortable with the IPO process because they community has done it so many times. Honestly, this theory doesn't totally resonate with me as NYC is the heart of Wall Street - all the relevant bankers, accountants and advisors are there. If any technology hub can build a strong middle market public company ecosystem, it should be NYC.
My firm, Flybridge Capital, operates with both offices and portfolio companies in both cities. We are seeing amazing things going on in the NYC start-up ecosystem and are investing heavily there in 2012. My summary view is that the outperformance is due to a more vibrant seed and Series A environment in 2003-2006, which is when many of these companies were started. Given how strong the seed and Series A environment has been in NYC for the last few years, the results should even out over time.
Unfortunately, I can't say the same for my Red Sox this year...
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