Tuesday, 9 February 2010

Investment Banker to The Valley gives his outlook - Frank Quattrone

So what was Quattrone’s market outlook for 2010?

—Quattrone told the venture capital partners in the audience, “Guys, if you were a stock, I’d short you.” While the mid-1990s were good years for technology IPOs, he said too many venture-backed companies that went public after 1998 have cratered. “Basically every [VC fund] vintage since 1998 has been negative,” Quattrone said. If you’re a limited partner investor, such as a university endowment, that’s invested in a post-1998 venture fund, Quattrone said, “This is not an asset class. This is a train wreck.”

—Because of the dismal record of IPOs after 1998, Quattrone said, there’s a perception that venture-backed companies have to be much bigger and more mature before registering to go public. If a venture-backed company could previously go public with $100 million in annual revenue, Quattrone says now it has to be $150 million to $200 million. Deal size also must be much bigger. “IPOs were done all the time for under $40 million in the ’80s and ’90s,” Quattrone said, “but nobody wants to do that any more.”

—”The whole approach to marketing and allocating IPOs has to change,” Quattrone said. “The mutual funds that are committed to being long-term holders of the stock—the T. Rowe Prices and the Neuberger Berman Guardians who really understand tech—should get more.”

—The IPO market has been closed for so long that hundreds of venture-backed companies are waiting to go public, “so there is an enormous backlog,” and Quattrone said he expects to see a stampede among the less-attractive companies to go public as soon as possible. “The very best are not the ones that rush to get out,” Quattrone said. The logical implication, which Quattrone didn’t say explicitly, is that disappointing debuts in the first wave of new IPOs could end up tainting the market. But then, aren’t the bankers supposed to have some responsibility for that?

the full story, plus interesting comments from the interviewer are here: http://bit.ly/brXlwa

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