Frank Quattrone, Star Banker of Technology Ventures, Talks Wistfully of the Good Old Days—Before Netscape’s IPO

his talk in San Diego, or in interviews published since his return to high finance. He doesn’t seem inclined to consider his own role in contributing to the mania on Wall Street.

So what was Quattrone’s market outlook for 2010? Here are a few highlights:

—Quattrone told the venture capital partners in the audience, “Guys, if you were a stock, I’d short you.” While the mid-1990s were good years for technology IPOs, he said too many venture-backed companies that went public after 1998 have cratered. “Basically every [VC fund] vintage since 1998 has been negative,” Quattrone said. If you’re a limited partner investor, such as a university endowment, that’s invested in a post-1998 venture fund, Quattrone said, “This is not an asset class. This is a train wreck.”

—Because of the dismal record of IPOs after 1998, Quattrone said, there’s a perception that venture-backed companies have to be much bigger and more mature before registering to go public. If a venture-backed company could previously go public with $100 million in annual revenue, Quattrone says now it has to be $150 million to $200 million. Deal size also must be much bigger. “IPOs were done all the time for under $40 million in the ’80s and ’90s,” Quattrone said, “but nobody wants to do that any more.”

—“The whole approach to marketing and allocating IPOs has to change,” Quattrone said. “The mutual funds that are committed to being long-term holders of the stock—the T. Rowe Prices and the Neuberger Berman Guardians who really understand tech—should get more.”

—The IPO market has been closed for so long that hundreds of venture-backed companies are waiting to go public, “so there is an enormous backlog,” and Quattrone said he expects to see a stampede among the less-attractive companies to go public as soon as possible. “The very best are not the ones that rush to get out,” Quattrone said. The logical implication, which Quattrone didn’t say explicitly, is that disappointing debuts in the first wave of new IPOs could end up tainting the market. But then, aren’t the bankers supposed to have some responsibility for that?

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Author: Bruce V. Bigelow

In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University. Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.