We can all use some good news from wall street and the IPO market. OpenTable IPO opens strong.
Is the IPO drought over? Not quite. But OpenTable’s successful IPO today will give tech startups and VCs a sign of hope that you can still go public eventually if you have a real business. On a day when the Nasdaq
is down 2 percent, OpenTable is up 40 percent from its offering price of $20 (which itself kept moving up from $12 to $14 initially). The stock opened at $24, and was trading at around $27.40 last time I checked. With 21.6 million shares outstanding, that gives OpenTable a market capitalization of $605 million on its first day of trading. (The company itself cleared $60 million in the offering).
This is an extremely healthy IPO. Opentable is not a blowout Internet company. But it is a solid Internet company that matters. It pulled in $55.8 million in revenues last year and a net loss of $1 million (largely due to expansion-related costs). In the first quarter of 2009, it managed to turn a net profit of $366,000 on revenues of $16 million. (For a deeper financial analysis, see this earlier post).
OpenTable delivers reservation management software to restaurants through a Web browser and collects monthly subscription revenues. In that sense it is in the same class of software companies as Salesforce—selling software as a service over the Web to business customers. But it also has a friendly (free) consumer-facing side. It is yet another example of enterprise and consumer apps merging in the cloud.
So what does it take for a tech company to IPO these days? If OpenTable is the new measuring stick, a company needs at least $50 million in revenues, have at least one quarter of profits, customers with proven loyalty, and solid growth potential. In other words, it needs to be a real business.