Swinging pendulums are a thing of beauty. Witness the possible shift in attitudes toward initial public offerings, or IPOs. For years now technology companies that could stay private did. Ample funding and low startup costs fueled the trend, as companies backed by venture capitalists tried growing without having to disclose their financials to their competitors.
Maybe that is changing. Matt Murphy, a veteran Silicon Valley capitalist, told The New York Times Wednesday that “in the last three months a number of companies have started saying that it’s not all that bad to be public.” He added: “If you’re a mature company with more than $50 million in revenue, an IPO is very much on your mind now.”
The occasion for this hopeful thinking is word that the parent company of the popular messaging service Snapchat has taken the first steps toward an IPO. The IPOs of standout companies typically mean little to the multitude of also-rans that would like to go public. Private-company investors like VCs would like nothing more, however, than to see the IPO market reopen.
Murphy’s second comment is telling. Referencing “mature” companies is a signal that VCs invested more than five years ago and would like their money back. Merely saying that a company has “more than $50 million in revenue” reveals nothing of its readiness to go public. Are its revenues growing? Does the company have a path to profitability? Is there competition on the horizon? These are the types of things public investors—read: mutual funds—will consider, not a company’s age and size.
In the late 1990s companies went public because they could, not because they were ready. I always thought it was reckless for an investment bank to underwrite the IPO of a fledgling tech company whose revenues were nascent and profits nonexistent. The investment banks that specialized in such deals argued it was a pure form of capitalism: There was plenty of demand, and they were creating supply.
Those banks are all gone now, as are most of their clients. Is an IPO boom coming? VCs certainly would like to think so. A Snapchat IPO won’t tell us a thing.
| Adam Lashinsky | |
| @adamlashinsky | |
| adam_lashinsky@fortune.com |
BITS AND BYTES
Would you buy things from a virtual shopping mall? Chinese e-commerce giant Alibaba is testing an application that blends e-commerce with virtual reality. In one prototype, shoppers use VR goggles to "walk" around a store. Customers can buy things by nodding at them, triggering the transaction process. That's just the tip of the iceberg of what will be possible over the next three decades, predicts Alibaba chairman Jack Ma. (Reuters, Fortune)
Google and Facebook back an underwater cable from Los Angeles to Hong Kong. The two are investing an undisclosed sum in a Chinese company to ensure speedy delivery of Internet data across the Pacific. Google, Facebook, and Microsoft have already invested millions of dollars in similar projects. (Wired, Wall Street Journal)
Sprint will mortgage airwaves to improve cash flow. The wireless carrier hopes to raise $3.5 billion by leasing 14% of its wireless spectrum to other companies. (Reuters, Bloomberg)
Apple plans second research center in China. This one is near the manufacturing metropolis of Shenzhen, where the company will work closely with local universities and other tech companies. The first site is in Beijing. (Reuters)
THE DOWNLOAD
How artificial intelligence will kill some jobs but create others. The Obama administration may be headed for the exits, but it continues to focus on the impact of artificial intelligence on the economy.
Its just-released report, “Preparing for the Future of Artificial Intelligence,” does not downplay potential job loss due to the advent of ever-smarter computers, but still posits that the technology will open up new career opportunities for those versed in it or who have higher-level skills. It also holds that public policy, especially retraining programs, can mitigate the negative impact of increasing automation by preparing displaced workers for other jobs. But robots also still have plenty to learn from humans.
IN CASE YOU MISSED IT
Businesses Could Spend Close to $102 Billion on Cybersecurity in 2020, by Robert Hackett
Microsoft HoloLens Goes Global as It Faces More Competition,
by Barb Darrow
The Amazon vs. Target Battle Is Moving to College Campuses,
by Phil Wahba
How to Stop Hackers from Taking Over Your Home, by Jeff John Roberts
Facebook Still Has a Fake News Problem, by Mathew Ingram
ONE MORE THING
Why Facebook wants to fly drones over its headquarters. The social networking giant has asked the FCC for permission to test wireless networks in a "controlled, low-altitude airborne environment." Most of the details are confidential. (Fortune)
This edition of Data Sheet was curated by Heather Clancy.
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