Silicon Valley IPO Dam Just Broke

Silicon Valley has been suffering a tech IPO drought, but the dam may have broken after data software company Talend, Inc. jumped 42 percent on its first day of trading.

Talend raised $94.5 million in its July 29 initial public offering (IPO) by pricing its shares at $18. The stock jumped to $25.50 by the end of the first day of trading.

Buoyed by strong July performances of Talend and LINE Corp., Twilio in June, and Acacia Communications in May, new IPOs are expected to flood the markets with at least another 10 Silicon Valley companies are expected to complete IPOs in the second half of this year.

The Silicon Valley IPO “pixie dust” money machine roared from 2011 through 2015. Increasingly lucrative profits from IPOs caused late-stage private financings to surge from $8.9 billion in 2013 to $16 billion in 2015, according to the National Venture Capital Association. Tech venture capitalists showed their new financial prowess by writing checks for over $1 billion to Uber, Airbnb, SpaceX and SoFi.

By late 2015, there were 163 venture-backed private companies that reached the $1 billion valuation, where so-called tech “unicorns” traditionally looked to go public. An exuberant Adley Bowden, vice president at private equity and venture capital database PitchBook said in December, “I expect to see more companies list to go public.”

But the IPO window was slammed shut after the stock prices for many of 2015’s hottest IPOs nosedived once they were public. By year end, Square was down by 22 percent, Box fell by 48 percent, Fit plunged by 53 percent and Etsy tanked by 72 percent.

Despite lousy post-IPO stock performance and an inability to take companies public, venture capitalists were still able to raise 72 percent more cash in the first quarter of 2016. But they did become much more selective in companies they would fund. Only 1,035 venture investments were completed in the first quarter of 2016, the lowest pace of activity since 2013.

But the demand for Talend shares may have opened the IPO floodgates. Trading on the NASDAQ under the symbol TLND, Talend was able to price its IPO above the expected $15-to-$17 range. By the end of the first day of trading, Talend’s equity valuation hit $713 million. The stock was up another 5 percent on August 1 to $27, for a market value of $750 million.

Talend was founded on the outskirts of Paris in 2006 and moved its headquarters to Redwood City in late 2013. The company makes software that allows companies to aggregate, organize, analyze and make useful “Big Data” from multiple platforms including sales and marketing data, internal employee information and data collected by remote sensors in smart cars.