Milken Institute
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IPOs, past and present
By: Milken Institute
November 16, 2012
When it comes to the IPO marketplace, it's not the size that matters; it's the quality.

Sure, the number of companies going public has declined dramatically from their peak in 1998 and 1999, when it seemed like any company with a website was generating a frenzy of activity. But the companies going public today have a much better chance of succeeding long term.

Lise Buyer, principal and founder of Class V Group, said close to two-thirds of the companies that went public during the boom are no longer in business, and not because they were acquired.

"For every large disk drive company that went public, there were a hundred that failed dramatically," said Jeffery Saper, vice chairman at Wilson Sonsini Goodrich & Rosati. Today, businesses seeking public financing are stronger, and more mature, and represent every sector and size around the world.

If things are so healthy, then why did the IPOs for Zynga, Groupon and Facebook fail to go viral? Jeff Jordan, partner at Andreessen Horowitz, said Zynga underwhelmed because its revenues were too dependent on Facebook; Groupon fizzled because 70 percent of its revenues come from outside the U.S. As for Facebook, the secondary marketaEUR"in which institutional investors sell their shares to retail buyersaEUR"had a profound effect.

"Everybody bought it because they thought they could sell it to somebody else higher," said Buyer.

Despite these disappointments, blue chip companies around the world still want to come to Silicon Valley because it has the deepest pool of liquidity, said Scott Cutler, executive vice president, head of global listings, NYSE Euronext. However, California is no longer the only place where new businesses can raise capital. He said last year was the first in which more venture capital dollars were invested in Boston and New York than in California, a significant shift.