Thursday, May 21, 2009

OpenTable IPO Soars on Day One

OpenTable’s successful IPO should give startups and VCs a sign of hope that you can still go public if you have a real business. OpenTable was up 59% from its initial offering price of $20. With 21.6 M shares outstanding, this gives OpenTable an initial market cap of ~$689M. See more detailed information here.

If you are not familiar with OpenTable: OpenTable delivers reservation management software to restaurants through a Web browser and collects monthly subscription revenues. In many respects, it is in the same class of software companies as Salesforce—selling software as a service over the Web to business customers. But it also has a friendly (free) consumer-facing side. It is yet another example of enterprise and consumer apps merging in the cloud.

OpenTable is a solid Internet company with a proven track record. It generated ~$55.8 M in revenues last year and a net loss of $1 million (largely due to expansion-related costs). In the first quarter of 2009, it managed to turn a net profit of $366,000 on revenues of $16 million.

So what does it take for a tech company to IPO these days? If OpenTable is the new measuring stick, a company needs at least $50 million in revenues, have at least one quarter of profits, customers with proven loyalty, and solid growth potential. In other words, it needs to be a real business.