After several quarters of disappointing news from public tech companies (primarily those affiliated with Jack Dorsey, but I digress) and story after story about private tech companies’ reluctance to go public, Twilio may have blown open the tech IPO window on Thursday. Making its debut on the NYSE under symbol TWLO, at the price of $15/share, shares in the cloud communications company opened at $23.99, 60% higher than its initial offering. Shares hit an intra-day high of $29.61 and closed at $28.79, up over 90% for the day. (Shares in Twilio, like most other companies, experienced significant declines in Friday trading thanks to Brexit news.)
For more information and context on the Twilio IPO, check out some of these resources:
- My friend Alex Wilhelm’s note on the IPO for Mattermark. (Also, thanks to Alex for linking to the EquityZen report mentioned below.)
- This analysis from EquityZen shows that Bessemer Venture Partners owns 28.5% of Twilio. Bessemer generated a 27.4x multiple on invested capital on its Series B investment and 9.6x MOIC its Series C follow on.
- That same report finds that Union Square Ventures generated an 82.3x MOIC on its Series A investment.
- Fred Wilson, general partner at Union Square Ventures, says that Twilio’s was the best seed pitch ever. Proof positive that a live working demo trumps even the best pitch decks.
Whether or not Twilio’s public offering is a one-off success or the beginning of a trend is impossible to say, because it was the first major tech IPO this year. (One data point does not a trend make.)
The next scheduled IPO is for Japanese mobile messaging app Line, which is slated to go public on the NASDAQ on July 12. (More info on Line’s impending IPO can be found on the NASDAQ site.) Although all eyes will be on Line and the market’s reaction to its debut, there are some things to keep in mind (notes cribbed from Bloomberg):
- Line filed for an IPO almost two years ago on the Japanese market at a valuation of 1 trillion yen. July’s IPO valuation, which will make shares publicly tradable on US and Japanese markets, is expected to be 588 billion yen, or 40% lower.
- Facebook has steadily encroached on Line’s key product areas with the launch and continued expansion of Messenger, and its acquisition of Whatsapp.
- Line’s average user is valued at $25 per user, less than half of the $55/user Facebook paid for Whatsapp.
Line is also unlike Twilio in that it’s not an infrastructure play. Remember that during a gold rush it’s best to invest in the people making the shovels, which is ostensibly why Twilio has performed so well… they built the platform that helped to catalyze the mobile app boom. Line has stiff competition from WeChat to the west and Snapchat, Messenger and Whatsapp to the east. And, unfortunately for Line, it’s one where the customers are more fickle.
Investors interested in this IPO should proceed with all the expected caution and due diligence, remember that one tech unicorn is not necessarily like another, and remember that past performance is not necessarily indicative of future results. There’s always room for an upside surprise.