Battery Ventures has a lot on its plate over the next couple of weeks.
The big Waltham venture-capital firm has one company in its investment portfolio, Netezza Corp. of Framingham, on the schedule to go public Wednesday. Another Battery portfolio company, BladeLogic Inc. of Waltham, is expected to launch its initial public stock offering the following week.
Two of Battery's companies went public this year. It's looking at a handful of others as possible IPO candidates.
But that experience isn't unusual among leading venture capitalists this year. Blue-chip local firms like Highland Capital Partners , Matrix Partners , Charles River Ventures , North Bridge Venture Partners, and others could all say pretty much the same thing.
The IPO market is enjoying its best year since 2000, showing a particular taste for technology companies. A total of 104 offerings raised $26.2 billion over the first half of this year (for details on Massachusetts IPO candidates and links to registration statements see the Boston Capital blog).
Larger companies, generating $75 million to $100 million in sales, with strong market positions and clear profits, are what investors started buying. That favored top-tier venture firms that had the capacity to nurture companies launched in the dark days between 2000 and 2003 and give them time to grow.
"What we've heard consistently from institutional buyers is they want pure-play market leaders where there's an opportunity for growth," says Sean Dalton , a general partner at Highland Capital Partners.
Take a close look at companies in the IPO pipeline, and you'll often find many of the familiar venture names holding big chunks of the same stocks. Netezza, which makes data warehouse products, counts Charles River, Battery Ventures, and Matrix Partners as big investors. Ditto West Coast heavyweights Sequoia Capital and Meritech Capital Partners .
Venture capitalists say the IPO market really began to open up to them about 18 months ago. But the real volume of IPOs and offerings in the pipeline has picked up dramatically in just the past few months, particularly for technology companies.
One reason: Warm stock market welcomes for IPO companies such as Riverbed Technology Inc. and Acme Packet Inc. of Burlington last fall. "That was just a message to the venture community and the underwriters that these companies would be received well by Wall Street," says Bruce Sachs , a partner at Charles River Ventures.
Venture firms sold some of their investments to private companies when there was no IPO option for several years. They complained about the risks and red tape of the public market and insisted it wasn't worth the trouble. They don't say that so much now.
"Candidly, I think the first preference of all venture guys would be to go public because there's a demonstrated premium for that rather than selling to a corporate buyer," says Tom Crotty , a general partner at Battery Ventures. "If you've got something that has an opportunity to get out and you're not at least thinking about it, you're probably making a mistake."
The IPO market started to rebound last year by pitching bigger, clearly profitable companies. Now, some of the companies, like Netezza, are nearly profitable but haven't actually made it into the black. Others, like BladeLogic, generate considerably less than $75 million in annual sales so far.
"As always, the line gets pushed back and back and back," says attorney John LeClaire of Goodwin Proctor LLP, who works on new stock offerings. "We're not racing toward the top of a cycle and I think the situation is solid on fundamentals. But the line is moving."
In the meantime, the IPO market is open and venture capitalists will supply as much stock as investors are willing to buy.