by Scott Denne
Typically, venture capitalists offer public investors fast-growing companies that remain far from profitability. Occasionally they come out with an IPO candidate with massive growth and a trail of red ink to match (see our report on Lyft’s upcoming offering). Rarely do they bring to market a startup with massive growth and actual profits (or even a compelling case that it could shortly become profitable). On Friday, they took the wraps off two such unusual startups – Zoom and Pinterest.
Of the two, Zoom finished its most recent fiscal year in the black. While the video communications vendor’s topline more than doubled to $330m, it generated an $8m profit. That wasn’t an anomaly, as the company, with a $4m loss, was nearly profitable a year earlier. Pinterest, while not yet profitable, cut its net loss in half to $63m last year while sales jumped 60% to $756m. Mind you, that’s a decline in net loss, not a decline relative to its sales growth, which is typically the most a venture-backed IPO candidate can boast.
Public offerings from a pair of companies with compelling financials could generate investor interest in tech IPOs more broadly. And a welcoming IPO market could provide relief to any VCs and entrepreneurs seeking large exits in the next few months, as 10-figure outcomes via M&A have dwindled in the first quarter. According to 451 Research’s M&A KnowledgeBase, 2019 has yet to see a $1bn-plus acquisition of a VC-backed portfolio company, following a record 13 of them last year.