Waiting for the Big Fish? The Next Web IPOs Might Surprise You
No, not Facebook.
And probably not Groupon.
At least not yet, when it comes to the blockbuster Web IPOs that Wall Street and investors have been waiting for, and now expecting to roll out sooner than later in the wake of the return of the Web IPO in recent weeks.
Not so fast.
While these events spurred a great deal of speculation about which Web wunderkind would belly up to the public trough next, sources said that those looking for IPOs well above the $5 billion range will have to wait a little longer.
Because, while companies such as social networking giant Facebook, social buying phenom Groupon and social gaming’s Zynga have all been courted heavily by investment bankers such as Goldman Sachs, Morgan Stanley and others–all remain well-funded and willing to hold off opening their books for all to see until the last possible moment.
“There’s not a lot of reason to expose all kinds of information that is keeping these companies ahead too early,” said one person close to the situation. “In fact, once that much data is out there, you could argue that they lose a lot of their magic to investors.”
Some of that financial information is already out there, although in small bites, which has only been a taste for investors.
Full-scale sunlight will be different. While it can be cleansing, it can also be disappointing to those with too-high expectations of these companies.
Thus, expect to see more small IPOs–at least in comparison–from outfits such as Chegg, which has also been deep in talks with bankers for a while now.
Chegg, like LinkedIn, has been highly successful in a niche arena–in its case, online rentals of textbook to college students.
In the fall, the Silicon Valley company raised another $75 million in funding, on top of a previous $144 million.
Venture firms, such as Kleiner Perkins, Foundation Capital, Insight Venture Partners and others have presumably handed over that money in hopes of big returns in disrupting a $10 billion college textbook business.
Chegg got its start in 2005 at Iowa State University as a classified rental service, where books were the dominant item, but evolved its business to focus on actually doing the textbook rentals.
Typically, a rental costs a fraction of what buying a book outright does. It is ordered online and then sent to a renter, who then returns it.
The company’s unusual name, Chegg, is a mashup of “chicken and egg,” and its model is similar to that of innovative video rental outfit Netflix.
And a Netflix-like business is what presumably may keep Wall Street investors interested–at least until the bigger fish arrive.