What the IPO Market Revival Means for Start-Up Funding Why a good showing among two recent public offerings could bode well for fast pace startups.

By Peter S. Cohan

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What the IPO Market Revival Means for Start-Up Funding
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Facebook defied expectations of a boffo IPO. But, as I wrote in May, its disastrous outcome did not spell doom for startups seeking funding. Two months later, two successful IPOs look to help revive investor's interest in tech investing. And that should be helpful for your venture.

To be sure, Facebook stock has lost 25 percent of its value since it went public May 18 at $38.50 a share. But by July 19th, two big pricings clocked in above their previous ranges. According to CNBC, Kayak Software plans to sell 3.5 million shares at $26 a share -- above its previous $22 to $25 a share range.

And Palo Alto Networks priced at $42 -- above its expected range which had been upped earlier this week, according to CNBC. While the stock is not cheap at that price, it's in an attractive industry -- network security -- and has a strong market position, experienced management and strong growth. And it popped 26 percent on its opening day.

Related: What Facebook's IPO Debacle Means for Startup Funding

What does this mean for your start-up? First of all, you have to be pretty big to go public. But if you're not there yet, consider what Asheem Chandna, whose firm Greylock Partners owns 22.3 percent of Palo Alto Networks, recently told me he looks for in a startup before investing.

Chandna likes to invest in companies with:

  • A CEO who is both frugal and humble while able to get customers to "believe that the startup represents the next generation and deserves to earn their business"
  • A good fit between the market needs and the startup's product and technology capabilities -- they must be better than competitors
  • Strong missions, excellent founders and the ability to recruit talent
  • An ambitious, yet realistic product road-map
  • The ability to deliver a "minimally viable, awesome product" and to "iterate rapidly" in response to customer feedback.

Related: A VC Reflects on Instagram, the Dot-Com Bust and What It All Means for Hungry Startups

If you've got this, then the revival of the IPO market means investors will have more money burning holes in their pockets that could find its way to your company's coffers.

Do you think a strong showing among IPOs will benefit startups? Leave a comment and let us know.

Peter S. Cohan

President of Peter S. Cohan & Associates

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He is the author of Hungry Start-up Strategy (Berrett-Koehler, 2012) and a full-time visiting lecturer in strategy at Babson College in Wellesley, Mass.

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