Wiser investors cautiously look forward to tech IPOs

The current IPO activity levels are not sufficient to sustain the market for venture capital investment. Initial public offering is the first sale of stock of a new company that was once private and is now trying to go public.

More than 80 percent of the venture capitalists who participated in the the 2001 Global Venture Capital survey believe the initial public offering market is still weak and the dearth of offerings curbs returns to venture capital investors.

[caption id=“attachment_29465” align=“alignleft” width=“380” caption=“So far tech companies have led the race in IPOs in the US and bankers are certain the trend is likely to continue. Reuters”] [/caption]

However, another survey by accounting and consulting firm BBD USA , suggests IPOs are going to grow in number and size by the second half of 2011. So far tech companies have led the race in IPOs in the US and bankers are certain the trend is likely to continue. Sixty-nine percent of bankers interviewed feel the offerings may also rise in the energy space.

The IPO market has picked up of late, but remains weak by historic standards. In the US, 75 IPOs have priced this year, up 27 percent from the year-ago period, according to Connecticut-based Renaissance Capital. Proceeds in the first quarter totaled $13.3 billion, more than double last year.

Traditionally, more venture-capital investments find exits through acquisitions than through IPOs, but public markets remain a key part of overall venture-capital strategy.

LinkedIn, the world’s biggest tech offering after Google, went public last month, followed by Groupon, a daily deal company. The brief high point of their debuts did add some swagger to other tech entrepreneurs, but some have not been so spectacular. Some investors worry that the performance of online radio company Pandora Media’s IPO could crimp the market. Pandora debuted on the New York Stock Exchange last week and the stock has fallen below its offer price of $16 after a short, sharp rise.

But this is not a tech boom as many suggest. Though the offerings are overpriced, they are nowhere near the boom of 1990s, where a tech company would debut every week, stocks would zoom and then make a headlong dive after a decade. A complete crash and burn situation.

Investors, today, are more willing to wait in line for hot brands like Facebook, Twitter and Zynga to debut. The venture investors also said they were beefing up investments in cloud computing, social and new media, and clean technology. The private valuations of these companies have only added to the pent-up demand for tech IPOs.

But do these companies have the potential to become the next Amazon or Google? It’s a wait and watch scenario.

With inputs from Reuters