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Chris Bulger: Who’s Really Atop the IPO BCS?

The Wall St. Journal reported recently that Morgan Stanley was king of the tech IPO world and they had topped the underwriter charts with $115 million in revenue. That’s good news? Is this a sign of health in the Tech IPO world? I spent many years leading many IPOs at Robertson Stephens, we were a small firm compared to Morgan Stanley, but $115m would have been a bad year.

Put in more current perspective, if Morgan’s tech group were a college football team, they would have about tied University Texas for the top spot on the 2011 revenue chart. They can take some comfort that the “Deutsche Bank Goffers” would have ranked 11th – just ahead of Oklahoma – and the lowly “Goldman Sachs 49er’s” would have come in at 16th barely tied with Iowa. Tech IPO banks and NCAA football teams have much in common – they both use cheerleaders to distract and arouse the crowd and they both rely on a passionate fan base whose enthusiasm often belies reason. However, the real point of this comparison is to comment on relative relevance to the economy.

Like football, innovation and growth are the lifeblood of the American way of life. What does it mean that our kings of IPO have shrunk to the size of college football programs? If the IPO market were still the real source of capital and liquidity for tech companies, this would be a sign of real concern. But this is no longer the case.

In 2011, US IPOs provided about $9 billion to tech companies. The bulk of growth capital investment – over $30 billion – came thru the private transactions you read about in places like peHUB. These private deals were larger, provided better shareholder liquidity and were often at higher values (Groupon or Zynga ring a bell). So, shrinkage in the IPO market is no cause for alarm as the capital is still flowing to companies that drive our economy.

Of course, IPOs for larger established companies continues to thrive and for larger tech companies like facebook there is always a window. But for those companies who haven’t found their way to the private capital markets and find themselves stuck in the long-term IPO pipeline – perhaps an application for Title XI funding?

A. Christopher Bulger founded Bulger Capital.