New Software Bloodlines Needed

There is an instructive factoid in a cover article on the maturing software market in this weekend Barron’s:

In a recent report, Software Equity noted that over the 30 months through June, 27 software companies came public, while more than 150 others were acquired. Doug Gonsalves, a managing director with SVB Alliant, an investment banking arm of Silicon Valley Bank, says the number of venture-backed software companies selling out has lately exceeded the number of new companies being funded, the first time that’s happened in a decade.

“Historically,” Software Equity Group observed in a report on second-quarter merger activity, “software IPOs and smaller, rapidly growing public companies would quickly take up the slack left by recently acquired public companies. That’s not happening today at a rate nearly sufficient to maintain a constant number of buyers.” [Emphasis added]

While some of this undoubtedly has to do with it being a crummy time for enterprise software companies to come public, one rational reason why it is a crummy time for enterprise software companies to come public, or be funded, is the (largely correct) perception that vendors of such apps, whether horizontal or vertical, are in the phantom headache business. They are, in other words, largely trying to convince companies to buy something to heal a pain that said companies don’t think they are feeling.


  1. It’s also rather unappealing for a software startup to take venture money at this point. The cost of a software startup is a lot lower overall, and there are may be more exit options available which are relatively lucrative when you don’t have venture funding.
    This is especially true in the Web space, maybe not as much in the moribund enterprise space.

  2. The numbers don’t lie

    With all due respect to those arguing that the software industry isn’t really consolidating (see The ‘Truth’ About Consolidation), it’s pretty tough to argue with the numbers presented in this week’s Barron’s:In a recent report, Software Equity noted t…