From Bootstrap to IPO?

Mon

Apr 24
2006

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A question for the Radar readers:

Does anyone know of a case where a company, let's say a software or Internet company, took no institutional investment (VC or other significant investment) up until the point of a successful IPO? Let's say that mezzanine rounds don't count against a candidate.

This came up in conversation over the weekend, and none of the learned participants in the discussion could think of any cases like this. Is VC a prerequisite for making a public offering?

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Comments: 19

Paul Kedrosky [04.24.06 07:00 PM]

Marc -- While that's relatively uncommon in NMS listings by U.S. companies, it is much more common outside the U.S. As I recall, both Corel and Cognos in Canada listed without venture capital backing.

Drew Patterson [04.24.06 08:24 PM]

I don't think hotels.com (at that time HRN) took any professional money.

joebob [04.24.06 08:45 PM]

I2 did it and VMware could have. In the 90's there were some entertainment software companies that did it. That is it in recent memory and I follow this very closely.

Dharmesh Shah [04.24.06 08:54 PM]

Though this is an older example, didn't Microsoft go public without raising outside capital? Also, didn't they have one of the longest periods elapsed from founding to IPO?

Keith Teare [04.24.06 09:12 PM]

I did it with EasyNet - recently acquired by BSkyB. But that was in thye UK, in 1996.

Keith Teare
ceo/edgeio

Marc Hedlund [04.24.06 09:28 PM]

I believe Microsoft took some venture capital from what is now August Capital.

HeresTomWithTheWeather [04.24.06 09:32 PM]

Dharmesh, TVI is the VC who invested in Microsoft.
-tom

Bryce [04.24.06 09:39 PM]

Microsoft took one round from Dave Marquardt and his firm TVI- but thy didn't need the money, just wanted Dave and his connections. I've never seen any firm claiming an investment in DELL, so they are a likely candidate for the list. Ebay took a small round from Benchmark, but never spent the money either. There are a lot of companies that could be public, but choose not to be. Because they have not taken any outside money, they can get rich off their own cashflow. Once you've taken outside money, you're implicitly/explicitly committing to selling your business at some point (IPO or M&A). Perhaps that skews the numbers a bit.

Bryce [04.24.06 10:18 PM]

A few other candidates for the list:

HP
Gateway
Qualcomm
Siebel
EMC

RichB [04.24.06 11:09 PM]

I don't think PartyGaming took vc

dwlt [04.25.06 03:07 AM]

I don't believe Dell took any outside investment prior to their IPO.

Keith Erskine [04.25.06 04:14 AM]

FTP Software, which went public in 1993, would fit your criteria. They only took a Mezzanine round from TA Associates (actually, bought out one of the founders before the IPO).

W.B. McNamara [04.25.06 06:08 AM]

NetCreations: self-funded by the founders in 1996, quickly cash-flow positive, IPO in 1999.

Motts McGregor [04.25.06 07:45 AM]

I think Lawson Software fits the bill here. Did a deal with TA in early 2001 on the way to an IPO later that same year.

Marc Hedlund [04.25.06 08:27 AM]

Bryce/dwlt: Dell, HP, Gateway, Qualcomm, and EMC are all hardware, so they don't fit the original criteria -- although the examples are interesting. I've certainly often received wisdom along the lines that "businesses with hard material costs are much more likely to need VC for early growth"; these examples call that into question.

And I'm not allowing examples that "could have" or "didn't spend it." :) Nice try! Still, we have a few good examples in this list.

Thanks, everyone! Any more ideas?

Julian Bond [04.25.06 09:53 AM]

How about Bootstrap to Trade Sale without VC? And the answer is loads of companies. IPO is not the only exit route.

Marc Hedlund [04.25.06 10:02 AM]

Julian -- yes, of course, there are other "exit" paths, though that's an investor's perspective, not a founder's necessarily. The discussion came up around the idea that bootstrapping implied a certain, smaller sustainable scale than VC-backing, and we were questioning that implication.

Paul Kedrosky [04.25.06 01:19 PM]

As an aside, having just spoken with an early Qualcomm employee, it is not true that Qualcomm took no outside capital in its pre-public days. It had angel money.

James Duncan [04.27.06 01:55 AM]

I don't think ebookers (a dot-com boomer) took any institutional investment to get to its IPO. There was definitely a significant amount of angel money, but AFAIK the angel was the founder & friends.

I certainly can't remember any investor-style pressure prior to the IPO. Mind you, the company IPO'd about 2 months after we launched the system, and I wasn't getting much sleep then...

Mon