Zendesk IPO means ‘all is forgiven, enterprise tech sector’

Zendesk’s first trading day following its IPO can be interpreted as good news for the enterprise tech sector, especially companies waiting to IPO.

According to the San Francisco Business Times, the stock jumped $4.43 to close at $13.43/share. Zendesk raised $100 million, despite a loss of $22.6 million (down from $24.4) in 2013 on annual revenue of $72 million (up 88%). The company had raised $86 million in venture funding prior to the IPO.

Some are questioning whether late stage investors in Zendesk aren’t getting a great return, since the company is now valued at only $900 million and the last round of VC money was at a $700-750M range. Venture capitalists are likely to be even more skittish about later stage rounds, unless they are adding on to existing investments.

What does this mean for other high profile pending tech IPOs, like Box, or the likely trajectory of recently IPOed companies, like Twitter?

My bet is that this is represents good news for enterprise tech companies. Zendesk has demonstrated that it can make money, and is growing. With $100 million in hand it has a few years of funded growth to expand its position in the customer service sector. Other companies with a similar profile — which includes Box (see Box can’t IPO, so now what?) — are likely to get a similar treatment.

This doesn’t extend to companies like Twitter, I don’t believe, that are in a totally different sector: consumer tech companies trying to find a workable business model based on advertising, or something like it.

 

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Stowe Boyd

Stowe Boyd

Lead analyst Gigaom Research

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