Seasoned investment advisor Frank Quattrone took the stage with Bill Gurley at Web 2.0 Summit today to talk about the difference between the climate in 2010 and when Quattrone began his career in the pre-IPO-boom 1980s.
What's the same, according to Quattrone? “The creativity and risk taking and the passion that people have as entreprenuers and also the infrastructure to support people who take risks.”
What's different? In the late 80s there were 285 public tech companies valued at a 237 billion dollar market cap, whereas today there are 6,000 public tech companies worth trillions of dollars. Tech is a much more fundamental part of economy. While the IPO market incentivizes entreprenuers to take risks, Quattrone said, “It's a lot easier to go public than to be public,” because right now there are 6000 companies you need to compete against.
Gurley asked Frank to give the startups in the audience a quick Frank Quattrone IPO tutorial. Quattrone said that companies considering going public should ask themselves the following questions:
1) How important is it for us to be a public company?
2) Do you have the 5-10 year snapshot or better video of your strategy?
3) Are you sure you're not a trick pony?
While IPOs can be great especially if you've got employees itching to exercise liquidity options, companies need to give it some thought before they hitch themselves to the quarterly wagon. “Sometimes it's great to have a report card about what you're worth every day and sometimes it's not so great.”
Quattrone emphasized his “not always so great to go public” point with the above slide, with so many top tech companies with money to burn the M&A market is also currently a really attractive option.