Bud Fox: How much is enough?
Gordon Gekko: It’s not a question of enough, pal. It’s a zero sum game, somebody wins, somebody loses. Money itself isn’t lost or made, it’s simply transferred from one perception to another.
(“Wall Street”, 1987 – prequel to “Wall Street: Money Never Sleeps: 2010)
I spent a few days last week meeting with more than a dozen Gartner investor clients in the San Francisco area. Since I spend most of my time working with Gartner enterprise clients, it is always something of a culture shock to meet with investor types. Simplifying a bit, they fall into two camps:
- Buy-side and sell-side analysts who cover publicly traded companies – to them, information security is disappearing from their radar screens because of all of the recent acquisitions and the trend of publicly traded security companies to go private, combined with the slow pace of IPOs.
- Venture capitalists who invest in startups – since most of the larger acquisitions of security companies tend to fail, all those acquisitions actually make a more fertile environment for startups to grow rapidly.
From a user perspective, there is a bit of a dichotomy here. Generally, the most innovative technology and the best service and support comes from privately-held security-focused vendors who don’t have to meet the short term demands of Wall Street. However, many corporate procurement officers are leery of the opaqueness of privately held companies and make choosing a publicly traded vendor the path of least resistance.
Having worked at two different security vendors both before and after they went public, I can tell you that it is a high probability that an IPO will radically change a small vendor, and usually not for the better. This is not always true, but generally the only time when the IPO improves the vendor (from the user perspective, not from the investor perspective) it is because the vendor was large enough and “old” enough (more than $80M in revenue and more than 5 years above $20M) that it had all the processes in place to survive the IPO and it had enough employees that many in key positions were not going get big time stock option rich the day after the IPO, and still had incentives to push and not just watch the stock price.
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