A few years ago I was talking to a venture capital firm about small security companies that might potentially IPO. When I mentioned a few small companies that I thought had good technology and happy customers, the VC said “Oh, those aren’t IPO targets – those are ‘lifestyle’ companies.” When I asked what that meant, he explained that the CEOs just liked running companies, they weren’t aggressive enough to head towards IPOs.
Gee, what a sin: a CEO who likes to run a company, enjoys providing value to customers, and has employees that like to work in a company that values customers over Wall Street.
A side note: the same VC also talked about small companies needing “lighthouse” accounts, big wins that would attract other big customers. I said we usually call these “reference” accounts and that lighthouses were actually used to warn ships away from shoals and reefs and other forms of danger…
Now, in the interest of full disclosure: I worked at Trusted Information Systems in the firewall space, and Entrust in the PKI market, through each of their IPOs. I wasn’t at either of them early enough to have equity and make a killing when they went public, so maybe I’m just jealous. But I saw the negative effect going public had on both company’s focus on customers and I’ve seen it time and time again in my 9 years at Gartner. I think there are a narrow set of circumstances where your vendor going public is good for you – though, of course, the same is true about your vendor getting acquired, which is today’s exit strategy of choice.
I think the phrase “exit strategy” is telling. What you really want is a security vendor who has a “staying strategy.” You can find at least one “lifestyle” vendor in most markets – InfoExpress comes to mind in the personal firewall space. Any others out there?
View Free, Relevant Gartner Research
Gartner's research helps you cut through the complexity and deliver the knowledge you need to make the right decisions quickly, and with confidence.Read Free Gartner Research
Comments or opinions expressed on this blog are those of the individual contributors only, and do not necessarily represent the views of Gartner, Inc. or its management. Readers may copy and redistribute blog postings on other blogs, or otherwise for private, non-commercial or journalistic purposes, with attribution to Gartner. This content may not be used for any other purposes in any other formats or media. The content on this blog is provided on an "as-is" basis. Gartner shall not be liable for any damages whatsoever arising out of the content or use of this blog.