Tech IPO market shows promise after dead first half of 2016

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Through the first eight months of 2016, there's been exactly one venture-backed technology IPO for U.S. companies.

You can't blame the stock market. All three major indexes have reached records in recent weeks, and the five most valuable companies now all come from the tech sector.

While there's no indication that the IPO floodgates are about to open, a few emerging tech companies are at least signaling that it's time to give public investors a shot.

Coupa Software, a cloud-based system that helps business manage their spending, has just filed to raise up to $75 million in an initial share sale. Coupa's prospectus marks the fifth from a venture-backed tech company in the second half of the year and the fourth since mid-August, according to FactSet.

The San Mateo, California-based company joined the billion-dollar start-up club in 2015, when it raised $80 million in a financing round led by T. Rowe Price. The share price at the time was $4.18, according to the prospectus filed Thursday, and Coupa has yet to offer a price range for the IPO.

Prior to Coupa, cloud software vendor Apptio on Aug. 26 filed to raise $75 million, four days after online ad company Trade Desk announced plans to raise over $86 million.

Silicon Valley's venture capitalists, who are sitting on many billions of dollars worth of start-up paper gains, can't wait to take their companies on the road. Here's what Jeff Richards, a partner at GGV Capital, had to say last week:



No matter what happens, 2016 is going to be a down year for tech IPOs. According to data from Jay Ritter, a finance professor at the University of Florida, an average of 37 tech companies went public annually between 2001 and 2015. The weakest year was 2008, the depths of the financial crisis, when there were only six, according to Ritter.

Twilio, the lone U.S. venture-backed tech company to go public in 2016, has certainly pleased investors. The maker of web-based communications technology sold shares at $15 a piece in June. It now trades at $55.95.

Like Twilio, Coupa is a high-growth company built for an era of cloud computing. Sales in the first half of 2016 surged 75 percent to $60.3 million, with 88 percent coming from subscription services. But Coupa is spending a significantly higher percentage of revenue on product development and sales and marketing. The company reported a $24.3 million net loss in the six months ended July, compared with a $25.1 million loss a year earlier.


In general, public market investors have been skittish of late on big-spending software vendors. The BVP Cloud Index, a basket of about 40 cloud companies tracked by Bessemer Venture Partners, has trailed the major U.S. benchmarks since January.

While Twilio is alone among domestic software IPOs, two foreign tech companies backed by venture capitalists have gone public on U.S. exchanges this year. China Online Education Group debuted in June and has since gained 16 percent. France's Talend sold shares the same month and has climbed 46 percent.