Talend Nudges Dormant Tech IPO Market

Software company Talend SA had a strong debut on the Nasdaq on Friday in what investors see as a possible boost for the lackluster tech IPO market so far this year.

Talend priced above the high end of its range Thursday night at $18, up $1 from the company’s estimated range, and raised $95 million. Shares opened Friday at $27.66, up nearly 54% from the IPO price, and closed at $25.50.

The IPO, only the fifth tech debut of 2016, provided an encouraging sign as companies have hesitated to risk a poor performance in the public markets even as private capital has become harder to raise.

“While relatively few in number, the strong aftermarket performance of these [recent] offerings is reinforcing the demand,” said Brett Paschke, head of Equity Capital Markets at investment banking firm William Blair & Co. “We are seeing many companies making preparations to launch and expect a more active IPO market in the coming months.”

Talend makes software that combines data from disparate corporate systems so that companies can use it to make business decisions. It claims more than 1,300 customers, including General Electric Co.

It attributed the decision to go public to a combination of revenue growth, positive cash flow, and burgeoning demand.

“Part of the reason we were able to take the company public in an environment like this is a combination of high and accelerating growth with cash-flow break even,” said Chief Executive Mike Tuchen. “We are sustainably cash-flow positive, and there is an enormous market [of big data and cloud customers] moving our way.”

The offering shows that the market for tech IPOs may be reviving after a dormant period.

Line Corp., which makes a mobile messaging app, raised $1.14 billion in July in a dual IPO in New York and Tokyo and was trading Friday nearly 12% above its IPO price of $32.84.

Twilio Inc., which provides telephony services over the internet, closed Friday at $40.63, up from an IPO price of $15.

Talend is somewhat unusual, according to Menlo Ventures Managing Director Matt Murphy, who isn’t a Talend investor. It was founded in France, has several European investors and less than $100 million in revenue, which venture investors have considered the bar for companies going public.

“If a company like that can get out and do well, it says a lot about the appetite out there for new issues, which is what everyone is worried about,” Mr. Murphy said.

Still, the IPO market has been missing big names like Uber or Airbnb, according to Andreessen Horowitz Managing Partner Scott Kupor.

“We need one of those marquee names to go out,” Mr. Kupor said. “Until then, you’ll see a slower drumbeat” of smaller companies.

Talend has raised more than $100 million from investors including Balderton Capital, Bpifrance, Idinvest Partners, Iris Capital and Silver Lake Sumeru.

Although it isn’t profitable, both revenue and net losses have been moving in the right direction. Its revenue last year was $76 million, up from $62.6 million in 2014. Net loss was $22 million, compared with a $22.5 million loss in 2014.

The market for software that, like Talend’s, helps corporate customers analyze large amounts of data has been uneven, as many customers have struggled to understand what they want to do with data and how to do it.

Big data technology is also shifting as more companies move software from their own premises to the cloud.

A couple of Talend’s competitors, Tibco Software Inc. and Informatica Corp., have gone private to manage this transition, which requires changing from selling perpetual licenses to cloud software subscriptions, according to IDC Research Director Stewart Bond.

While Talend’s cloud business is growing, “almost every company will be hybrid [cloud and on-premises] for at least another decade,” Mr. Tuchen said. “We can solve the problem while they’re doing it.”

About half the market doesn’t use specialized software to extract and analyze data, instead doing it by hand, he said. That leaves lots of opportunity for software companies to automate the work, he added.


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