Biotech IPO fever continues, but fintech coming on strong: VCJ

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Enthusiasm over venture-backed biotech IPOs has continued at a fever pitch this summer. In June and July, 17 of the 22 IPOs, or more than three out of four, were biotech startups.

That continues a theme that the market has seen all year long with VC-backed offerings. Through the end of July, 59 of the 82 venture-backed IPOs this year, or 72 percent, were biotech or healthcare-related, according to Thomson Reuters, publisher of VCJ.

This includes Care.com, an operator of a portal for caregiving services, and Castlight, a provider of healthcare shopping services, as well drug developers Alder Biopharmaceuticals, SAGE Therapeutics and Vital Therapies, among others.

Despite a slowdown of IPO activity in early August, the window for new VC-backed offerings likely will remain open for biotech startups the rest of the year, as companies that in the past might have opted for a trade sale to large pharmaceutical corporations are now considering listing their shares instead.

However, while newly issued biotech IPOs are hot, a number of tech companies are already on the IPO launching pad or are expecting soon to file registration papers. And when all is said and done, fintech may be one of the largest categories of new IPOs in 2014.

Many stock watchers have been looking at the online lending space, and their wish was granted this week with the IPO filing from peer-to-peer lender LendingClub, the most heavily backed online lending company. (Subscribers of VCJ can read more about VC-backed online lending companies here.) The company’s shareholders include Norwest Venture Partners, Canvas Venture Fund (through Morgenthaler Ventures), Canaan Partners, Google Ventures, Foundation Capital and others.

LendingClub has raised about $290 million in equity and debt and is reportedly valued at $3.5 billion, according to Thomson Reuters.

Charles Moldow, general partner at late-stage LendingClub backer Foundation Capital, said it is “completely unpredictable as to what will happen on the IPO market the rest of the year.”

But he noted that many high-quality companies are in the IPO queue, and he is especially bullish in regard to the marketplace lending space. According to his estimates, banks, credit cards and other lending institutions generate more than $870 billion each year in fees and interest from more than $3.2 trillion in lending activity, which LendingClub and other relatively new online lenders are carving into.

”That’s bigger than the automobile industry. It’s bigger than the airline industry. And it’s bigger than both of those industries combined,” Moldow said. ”That’s how big marketplace lending can get.”

LendingClub likely won’t be the only fintech company to go public in 2014.

Yodlee, a Redwood City, California-based provider of online banking software, filed to raise a $75 million IPO. The company had previously raised more than $200 in capital from a bevy of investors, including Accel Partners, Draper Fisher Jurvetson, Institutional Venture Partners, Intel Capital, Sequoia Capital and others.

Also, small business lender OnDeck Capital, as of mid-August, was reportedly on the verge of filing its own IPO plans. The New York-based company has raised about $180 million from Tiger Global Management, Google Ventures, IVP, Peter Thiel of the Founders Fund and former American Express CEO James Robinson III.

“Technology and innovation are making possible a new generation of financial services that are more affordable and more available,” Moldow said in his white paper on online lending, called ”A Trillion Dollar Market By the People, For the People.”

“That’s why we believe what we’re calling marketplace lending will be a trillion-dollar market by the people, for the people.”

A version of this story first appeared in Reuters Venture Capital Journal. Subscribers can read the full story here. To subscribe to VCJ, click here for the Marketplace.

Photo of Charles Moldow courtesy of Foundation Capital.

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