Technology companies eager to go public need a detailed business plan, but profits are not mandatory, a panel of Silicon Alley venture capitalists and new-media pioneers told interested entrepreneurs.
In fact, in this technology-hungry market, having a few losing years is almost a plus, one speaker noted ironically.
Speaking before 50 technology upstart companies at the monthly Silicon Alley Breakfast Club on Wednesday, Allesandro Piol, head of technology investing at Invesco Private Capital, recalled how priorities have changed among venture investors in recent years.
A few years ago when Netscape Communications went public, Piol said venture capitalists demanded that tech firms already be profitable, with one to two years of assured revenues, in order to get financing for an IPO.
But times have changed as the red-hot Internet market has driven stock valuations sky-high.
In today's tech-crazy market, companies no longer need be profitable to be a hit on Wall Street, he said.
"Expectations are so low on Wall Street that when you beat the numbers, which is almost too easy, the stock goes through the roof," he said.
Compared to the pre-Netscape gold rush, investors today are "betting more on promises than results," he said.
Piol's own investing strategy focuses on companies seeking late-stage financing ahead of a public offering. That is, companies who already have a clearly defined business plan, a potential customer base lined up, and a financial track record.
Kevin O'Connor, the CEO of Internet advertising company DoubleClick, who led the company through one of 1998's most successful public offerings to date, called going public "a great PR event."
Piol called an IPO "almost a necessity to get name recognition," not to mention additional capital.
