Where's All the Money Gone?
According to the National Venture Capital Association, there were no venture-backed IPOs in the second quarter and mergers and acquisitions were markedly down. It's being called a "crisis" (at least by TechCrunch).
Evidently there were only 5 IPOs last quarter that resulted in only $283 million being raised. Wow. Compare this against the first half of 2007 that brought in $6.3 billion in equity from 43 IPOs.
And it seems like the market is unfairly punishing many good companies that have recently gone public. Just look at Aruba. Clearly a solid business with great gross margins (if you eliminate their low end 800 controllers), marquis customers and defensible differentiation, Aruba's value is only $400M (even with $100M in the bank). Are you kidding?
Being acquired is also becoming harder with the depressed market caps of companies. During the first half of 2008, there were 120 V-backed M&A deals. Check these charts out (click to enlarge):
Obviously most of the blame is being put on the failing economy. According to a survey of 660 VCs conducted by the NVCA, the "three largest factors to which VCs attribute the current IPO drought" are: skittish investors (77%), the mortgage crisis (64%) and Sarbanes Oxley compliance (57%).
So what the hell do companies like ours do? Is there no available exit? It's tough to go public because the IPO market has effectively dried up. And nobody has enough funny money (read market capitalization) to acquire us. Well, guess what....there's another option.
How about just building a good and profitable business that does something meaningful? What a concept. And that's what we're doing and it's early days.
We're seeing healthy market growth in Wi-Fi from both carriers and enterprises.Why? Because they want better Wi-Fi at a better price (once again, another not-so-profound concept).
And these markets remain nascent. Carriers are just getting their arms around HD triple play services and how to use Wi-Fi to distribute them around the home. They've always liked the idea but never thought it could really be done in a production network. Now they're changing their tune.
Meanwhile the big growth in the WLAN space is actually in the overlooked and underserved middle market which is serviced by channel partners who have largely been neglected and looking for a channel-friendly wireless LAN system. They just want a compelling, simple and affordable solution with healthy margins that make their customers happy. Well, we have it.
In fact. the crappy economy has been a boon to our business. Amazingly we are getting cold calls from would-be customers that want a better Wi-Fi system that can save them money, headaches and time. They see the value of using smart wireless meshing to eliminate having to run Ethernet cable to each and every AP, using long-range directional antennas to reduce the AP count, improve signal reliability and extend coverage. Go figure.
So despite all the doom and gloom, the war in Iraq, the rising cost of milk and money being harder to come by these days, if you have a truly good idea that uniquely solves an important problem, you'll do just fine.
