Tech IPOs come into focus.

• Author: Peterson, Eric
• Position: STATE of the STATE

There's plenty of activity in the tech startup world, except at the top: That rock star of exits--the initial public offering--has left the building.

For much of 2015 and 2016, there were nothing but crickets chirping in cyberspace, until San Francisco-based Twilio went public in June 2016.

Nationally, tech IPOs are down about 50 percent for the year, after a more significant year-over-year decline in 2015. In Colorado, the drought dates back to Zayo Group's IPO in late 2014. Before that, it was Rally Software in 2013, but that IPO was effectively undone by the Boulder-based company's acquisition by CA Technologies in 2015.

The dearth is partly about exaggerated expectations coming in line with reality. And it's best to keep expectations in check, not base them on the startup du jour.

"It's not always wise to make investment decisions based on today's IPO market," says Peter Adams, executive director of Rockies Venture Club, a regional group of angel investors. Navigating from initial investment to exit typically requires "five to seven years and another economic cycle," he adds.

Tech startups need to weigh the pros and cons of other exit strategies alongside IPOs. A business plan should involve multiple choices. "If that's their one strategy, they're going to have a hard time raising early-stage capital," says Dave Harris, RVC's director of operations.

Case in point: Ping Identity. The Denver-based identity platform provider was at the center of speculation it would go public for several years before San Francisco-based Vista Equity Partners bought the company for a reported $600 million in June. Adams says the deal "may provide more opportunities than an IPO would have."

Boulder-based LogRhythm has taken its place in the IPO rumor mill, with speculation centered on 2017, he adds. SendGrid and Coalfire are other Colorado tech companies in the conversation, as was Denver-based Optiv Inc., before it opted to remain private in mid-December after private-equity firm KKR became majority owner.

The latest crop of Silicon Valley darlings typically set the bar for the entire market. "Ultimately, it's tech IPOs that drive venture-capital valuations," says Adams. "They've gone up 50 percent in the past year, in part due to the unicorn phenomenon. Hopefully, some of the tech IPOs happening will set more realistic expectations."

As the valuations of these unicorns --private companies valued over $1 billion--soared, a ripple effect carried over to...