In the days of the Internet IPO gold rush, Todd Carter serves as a sort of gatekeeper between the public market and hordes of attention-hungry dot com companies eager to sell their shares.
As director of investment banking at BancBoston Robertson Stephens, part of Carter's job is to pick out the top candidates from the scores of Internet companies that inundate his offices seeking his help in launching an initial public stock offering.
Lately, the list of candidates keeps getting longer.
"We're seeing more companies that want to go public than we could ever work with," he said.
In a typical week, Carter says he gets about 150 business plans to look at, more than he's ever gotten before. And although he's agreeing to work with many of them, he's also turning away an unprecedented number.
He's not alone.
In the first nine months of this year, 332 companies have launched IPOs on the Nasdaq exchange -- the favored venue for new tech issues -- compared to a mere 198 new issues in the same period last year. Judging by the lineup of companies that have filed to go public but haven't started trading, the pace should keep up for several more months.
But professionals who specialize in taking companies public say the number of IPOs taking place pales in comparison to the number of companies that are seriously considering the possibility of going public.
"For every company that actually goes public, there are probably 10 times as many that are in some planning stage," said Brian Baum, national director of online consulting for Ernst & Young, the accounting firm used by more than 90 companies that launched IPOs this year.
As a result, the middlemen who do the scut work to prepare private companies for IPOs are seeing a surge in the number of companies seeking their assistance. Everyone from investment bankers to accountants to attorneys involved in the IPO process is feeling stretched to the limit.
"None of us have the resources," Baum said. "There are just too many companies."
IPO middlemen cite a bunch of reasons behind the rise in demand for their services, not the least of which is the fact that there's just a huge number of startups out there. Other contributing factors include a zippy economy, a healthy supply of venture capital, and strong demand from investors for shares of early stage tech companies.
Added to the mix is the increasing speed with which companies go from being mere concepts to becoming publicly traded companies. While companies once spent years building up profits before even thinking about an IPO, Internet startups are notorious for launching lucrative public offerings even while their businesses are trailing red ink.
Increasingly, start-up companies are planning their stock market debut at the same time they're putting their first business plan together, said Jeff Levy, a founder of eHatchery, an Atlanta company that incubates Internet businesses. Levy estimates that nearly a third of companies making pitches for startup funding mention their IPO strategy sometime in their presentation.
Levy sees the obsession with public-offering riches as a worrisome trend, since it makes him question executives' commitment to building their company over the long term. Nevertheless, it makes sense that entrepreneurs are thinking that way, since many of their colleagues are finding a fast road to riches through IPOs.
"Over an 18-month period, a company can go from inception to being worth a couple of billion dollars," Carter said. "We have never seen that kind of velocity and acceleration of business and capital coming together."
And when companies do want to go public, most of them chase the same middlemen, in particular the handful of big-name investment banks involved in the largest offerings.
Nearly all of the large top investment banks are seeing an increase in IPO business. Credit Suisse Boston, for example, was lead underwriter for 39 companies going public this year -- more than any other bank -- and nearly three times the number of IPOs it did last year. Other heavy hitters, including Morgan Stanley, Goldman Sachs, and Bear Stearns, are also churning out more Internet deals than ever before.
But for every deal that goes through, there are even more that get turned away.
"Any time you see a company go out early, it fuels the fire for 10, 15, 100 companies to say, 'Wow, that company went public, and we have a lot more than they have,'" Carter said.
