IPO Check-up: New York

Yesterday, inspired by Bill Gurley’s piece looking at the IPO market in Silicon Valley, I took a closer look at the Massachusetts IPO scene. Now, let’s look at New York.

Unlike MA’s robust public company ecosystem, where I counted 33 public companies with greater than $1 billion in market capitalization, I was shocked to discover how very few similarly situated public companies in the Innovation Economy that exist in NY. If you restrict the geography to 30-45 minutes driving distance and part of the New York City “scene” (which encourages mingling and productive talent and idea sharing), you have to eliminate CA, IBM and Priceline. I think that only leaves you with:

• AOL ($2B)
• Intralinks ($1B)
• TakeTwo Interactive ($1B)

I’m sure I must be missing a few, but my informal survey of NY VCs, bankers and entrepreneurs didn’t yield any others. There are a few smaller public companies, like Travelzoo ($660M) and Medidata ($470M), but even the sub-$1 billion market cap list is uninspiring. Given the digital transformation of media and advertising, some may argue that the big media companies and advertising agencies should be included here and certainly they play a very important part of the NY ecosystem, but in terms of pure technology companies with entrepreneurial DNA and technology roots, it’s disappointing to see how few are in NY.

That said, when you analyze the pipeline of IPO candidates, you begin to see a very different picture. Not only is it quite robust – there are roughly 30 companies with estimated market values of greater than $100 million – but arguably full of companies that feel more promising and explosive than the MA companies. This chart is lifted from the Business Insider list, but I also cross-checked with AlwaysOn, Inc’s various lists and input from local members of the entrepreneurial community.

As far as I know, none of these companies have yet registered to go public. Everyday Health almost did, but then pulled out and raised a private round of financing instead. Behind this list, there are tens of other strong NY-based start-ups with real revenue momentum and arguably belong in the > $100 million market value category. Folks cite 33Across, BuddyMedia, Clickable, Etsy, GLG, LiquidNet, MediaMath, OLX and Vostu among them.

The conclusion is that in NY, a robust public company ecosystem does not exist. Unlike in MA, one doesn’t see public company CEOs regularly mingling with their pre-IPO brethren at cocktail parties and industry gatherings. If you fast forward two or three years, however, the IPO company pipeline appears quite promising – arguably more promising than MA’s – and bodes well if the investors and management teams have the courage to go all the way. Then, the CEOs of these companies will need to heed the warning of many wise men and women before them who know that an IPO is not an exit, it’s a financing event. The best is yet to come.

Jeff Bussgang is a general partner at Flybridge Capital Partners and an Entrepreneur-in-Residence at Harvard Business School. He is the author of Mastering the VC Game, writes the blog Seeing Both Sides, and can be followed on Twitter @bussgang.