10 Private Tech Companies Investors Want To See IPO

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2013 could be a comeback year for tech IPOs, for the simple reason of demand and supply.Stock markets are ruled by equal parts fear and greed.

In the tech sector, fear ruled for a decade after the dotcom bust. Investors, with memories of portfolios ruined in the Nasdaq crash, feared buying early-stage tech stocks, while entrepreneurs, facing burdensome new regulations and sceptical markets, feared selling pieces of their company to them.

The fortunes made trading privately held shares have welcomed greed back. Speculators have watched with envy as well-connected Silicon Valley insiders and founders have kept this trade largely to themselves. Secondary markets like SecondMarket and SharesPost have given only limited access.

Investors have been burned by Facebook, Groupon, and Zynga. But things are getting better: 9 of the 10 venture-backed companies that went public in the third quarter traded above their offering price, Thomson Reuters recently noted.

So who’s next? We went with a simple measure of demand: SecondMarket lets investors add private companies to a “watch list,” and it publishes the number of watchers each company has attracted. We’ve also added our thoughts on the likelihood that their IPO wishes will come true.

1. Twitter

Watchers: 11,375

Most recent valuation: $8 billion

Comments: Twitter chairman Jack Dorsey recently said that that the global information network was getting itself ready to go public--for example, by hiring former Pixar CFO Ali Rowghani--but at a time of its choosing. CEO Dick Costolo has repeatedly said that the company has a 'truckload' of money in the bank, which is literally true.

2. Dropbox

Watchers: 6,769

Most recent valuation: $4 billion

Comments: With 100 million users, Dropbox is far and away the biggest player in online file storage and sharing. Only an estimated 4 million of those users pay $9.99 a mo. or more for the service, but that's enough to give the startup substantial revenues.

3. Foursquare

Watchers: 5,549

Most recent valuation: $760 million

Comments: SecondMarket's Foursquare fans may be optimistic. The local guide and check-in service has scant revenues and is reportedly having trouble raising fresh capital from private investors. Why would public-market investors be more forgiving?

4. Square

Watchers: 4,538

Most recent valuation: $3.25 billion

Comments: Like Dorsey's Twitter, his other company, Square, is taking steps towards going public. It has hired a CFO and raised fresh funding from Citi and Starbucks. It has a splashy deal to process payments for the coffee chain as well. But it has been coy about how much money it makes on transactions--information that filing to go public would force it to disclose.

5. Hulu

Watchers: 3,814

Most recent valuation: $2 billion

Comments: After buying back the stake of Providence Equity Partners, the online-video service is owned by the companies whose TV networks also provide it much of its content: News Corp., Disney, and Comcast's NBCUniversal. It's unlikely Hulu will go public unless it can strike long-term deals with its owner-partners. Its recent deal with CBS, though, has reassured observers that Hulu can compete with Netflix and Amazon for content licenses.

6. Craigslist

Watchers: 3,476

Most recent valuation: $3 billion

Comments: Given how hard CEO Jim Buckmaster and founder Craig Newmark fought in court to prevent eBay, which owns a 28.4 per cent stake in the company it purchased from a former employee, from playing a role at the company, it's hard to imagine them welcoming public investors. If the online listings service ever went public, it would surely use multiple classes of stock to keep current management firmly in control. But even then, we can't see it happening. Sorry.

7. Gilt Groupe

Watchers: 3,396

Most recent valuation: $1 billion

Comments: This flash-sales site is seen as a play on the next wave of e-commerce. But it's struggled to expand beyond its original discount-fashion market, recently pulling back on ventures into travel, menswear, and food. It's also looking for a new CEO to replace cofounder Kevin Ryan. (Disclosure: Outgoing Gilt Groupe CEO Kevin Ryan is also cofounder and chairman of Business Insider.)

8. LivingSocial

Watchers: 3,150

Most recent valuation: $5 billion

Comments: Being the closest rival to Groupon isn't as sexy as it used to sound. And the Wall Street Journal recently questioned how much money it has left in the bank. Still, the daily-deals provider is the only other credible player in the market, and its most recent quarterly results--reported via Amazon.com, which owns a big stake in the company--showed losses narrowing.

9. Spotify

Watchers: 3,127

Most recent valuation: $3 billion

Comments: Goldman Sachs, Fidelity, and Coca-Cola recently invested in the online-music startup, whose user numbers have been boosted by an integration with Facebook.

10. Pinterest

Watchers: 2,266

Most recent valuation: $1.5 billion

Comments: Let's call this wishful thinking on SecondMarket watchers' part. While Pinterest has raised $100 million in funding this year, hired former Facebook and Google executives, and moved into an expansive new office in San Francisco, it has yet to unveil any plans for making money.

Here's what it looks like when an IPO works out ...

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