The IPO market often provides lots of juicy investment opportunities, especially in hot areas like software and biotechnology.
But for 2015, things weren’t so interesting. For the most part, there were no high-profile deals. Perhaps the reason is that the venture capital (VC) market has been strong, which has resulted in little incentive for private companies to pull off IPOs.
But this could easily change next year. First of all, there are signs that VCs are getting more circumspect. To this end, several mutual funds like Fidelity and BlackRock (BLK) have recently slashed the valuations on companies like Snapchat and Zenefits.
Furthermore, there will inevitably be more pressure for VCs to get cash returns on their mega investments.
OK then, what deals may we see in 2016? Well, here are ten that have a good chance of getting done:
IPO Prospect No. 1: Airbnb
Airbnb is one of the pioneers of the so-called “sharing economy.” Essentially, the company operates an online and mobile marketplace that allows people to rent out rooms of their homes or apartments.
To get a sense of the growth, Airbnb expects to nearly double the bookings on New Year’s Eve to over a million. The company offers its services in over 190 countries, even Cuba.
During the summer, Airbnb raised a whopping $1.5 billion at a valuation of $25.5 billion, making it the third most valuable startup in the world. Investors included General Atlantic, Hillhouse Capital Group and Tiger Global Management.
So why go public? There are several reasons. First, there will likely be interest from Wall Street since Airbnb appears to have strong financials, with revenues more than doubling to $340 million in the third quarter.
Next, the company has been moving aggressively into overseas markets. Thus, by being public, Airbnb can use its stock as currency to pull off deals. This will definitely be helpful because the company is starting to see real competition emerge, such as from big players like Expedia (EXPE).
IPO Prospect No. 2: SecureWorks
Back in the summer of 2011, Dell purchased SecureWorks for roughly $612 million. The deal was about bolstering the computer giant’s moves into the fast-growing cybersecurity space.
So why now spin-off the asset? All in all, Dell actually needs to gin up more cash for its $67 billion acquisition of EMC (EMC).
In terms of the SecureWorks core business, the focus is on providing a wide assortment of solutions, such as to prevent security breaches, identify malicious activity in real-time and even predict potential threats. The company, which has been around for 16 years, has over 4,100 clients.
Growth has been fairly stable, with a 27% increase in revenues in fiscal 2015 to $205.8 million. More importantly, given that cybersecurity is a “must have” for many organizations across the globe, it’s a good bet that there won’t be a slowdown anytime soon.
IPO Prospect No. 3: BATS Global Markets
BATS Global Markets operates a large platform that allows for trades across various markets, such as for equities, bonds and currencies. At the core of this is a next-generation technology system that provides for tremendous efficiencies.
But in 2012, BATS showed that technology can fail — and in a big way. You see, the company tried to offer shares of itself on its own platform. And, for the most part, it was an absolute disaster, as the stock quickly plunged to near zero! The mess even spilled over into many other stocks, pulling down the valuations of companies like Apple (AAPL).
As should be no surprise, BATS cancelled the deal and returned investors’ money. Then there was a focus on improving the software and core infrastructure.
While the process was painful, it was well worth it. After all, BATS has returned to strong growth and profitability. During the first nine months of this year, earnings jumped from $30.9 million to $57 million and revenues increased by 31% to $1.34 billion.
Interestingly enough, BATS is the No. 2 operator in trading volume in the U.S. among stock exchanges and the largest in Europe.
So now, BATS has recently filed for another try at an IPO, which should happen sometime in the first quarter of next year.
IPO Prospect No. 4: VIZIO
VIZIO is a top seller of televisions and audio devices. Since its inception in 2002, the company has sold over 65 million units.
Perhaps the most interesting part of VIZIO is its Internet-conncetable systems. Keep in mind that there is a community of more than 10 million on the market. In other words, VIZIO has been able to collect huge amounts of valuable data, which is part of its Inscape data services. This helps improve the targeting with advertising and content offerings. No doubt, such things could ultimately turn into strong revenue drivers.
But VIZIO has been able to build its platform with much efficiency, such as by leveraging partnerships and outsourcing arrangements. The upshot is that the company has been profitable for nine consecutive years.
Yet VIZIO has shown that it knows how to keep innovating, as well as finding ways to reduce costs. For example, according Gap Intelligence, the company holds either the No. 1 or No. 2. shelf positions for HDTVs at major consumer electronics retailers like Walmart (WMT), Costco (COST), Sam’s Club and Target (TGT).
IPO Prospect No. 5: Dropbox
According to the CEO of CB Insights, Anand Sanwal, there will likely be some companies that will have little choice but go public in 2016. He calls these “dragged-to-IPO” deals. The reason? For the most part, these kinds of companies have been valued too high in the private markets and have not met the lofty expectations.
One such company on Sanwal’s list is Dropbox. While the company revolutionized the cloud/mobile storage business, there are now signs that the growth is trailing off. A big factor has been the intense competition from players like Amazon.com (AMZN), Microsoft (MSFT) and Google (GOOG, GOOGL).
But it also looks like Dropbox’s efforts in the business market has also been challenging.
Although, all this does not mean that an IPO will be a bad one. If anything, Dropbox may provide a compelling valuation to attract the interest of skeptical investors.
IPO Prospect No. 6: Pinterest
When it comes to e-commerce, there are many hot operators that have quickly fizzled, as seen with Gilt and Fab.com. But so far, Pinterest is doing a pretty good job at keeping relevant with users.
The funny thing is that the company’s system is basic — with a scrapbooking motif. That is, users can create their own virtual canvas of photos, such as of products, recipes and other items.
On a monthly basis, Pinterest attracts about 100 million users who “pin” various products to design interesting pages. In fact, at the start of the year, there were about 47.1 million monthly active users).
With such a large audience, Pinterest has been making strong moves towards monetization, including buy buttons as well as online ads. But there are also some creative features like Action Buttons. These let a user convert a recipe into the ingredients — which go straight to the shopping cart.
“Pinterest has been focused on getting its financial house in order as it looks to follow in the footsteps of Facebook (FB) and Twitter (TWTR) as the last of the high-profile social media companies to go public,” said Kristen Koh Goldstein, whos is the founder and CEO of Scalus (I recently did an interview with her). “Management’s astute focus on monetization and inking deals around its ‘buyable pins’ broadens its revenue stream as consumers can purchase directly from partners Pinterest works with. With a growing mobile usage rate and a focus on finding new use-cases for its platform, Pinterest should fare well under the scrutiny of the public markets.”
IPO Prospect No. 7: InsideSales.com
InsideSales.com is not the prototypical tech startup. First of all, the company is based in Provo, Utah. And something else: InsideSales.com was bootstrapped for the first seven years of its existence.
But such things definitely did not prove to be liabilities. If anything, they will likely be key in getting the interest of Wall Street.
For the most part, InsideSales.com is focused on building technology to help companies accelerate their sales — which, by the way, is always something that is in high demand. In all, the company serves over 2,200 customers.
But the platform has also become a valuable data analytics engine, which has processed almost 100 billion sales interactions. To this end, InsideSales.com recently launched its Predictive Cloud system. Think of it as a next-generation Amazon.com recommendation technology. But the Predictive Cloud can be used across many types of organizations, in government, healthcare, retail and so on.
Basically, this technology could greatly expand the potential market reach of InsideSales.com’s market.
IPO Prospect No. 8: MuleSoft
MuleSoft is a top developer of APIs (application programming interfaces).
Sounds kind of bland? Perhaps so. But APIs are turning into a big business. This type of technology makes it easier for companies to hook their systems to partner/employee portals, mobile apps and the cloud. The technology should also be pivotal for the megatrend of the Internet-of-Things (IoT).
As for MuleSoft, the company’s roots go back to 2003 when Ross Mason got frustrated with the integration of disparate IT systems (he called it “donkey work”). So he developed open source software to solve the problems he faced.
It was spot-on — and the growth was rapid.
Then a few years later, Mason’s software became the core of MuleSoft, which would eventually evolve into the Anypoint Platform (this is a full-suite of tools to help with seamless data connections, traffic management and the creation of APIs).
Currently, the company has over 825 enterprise customers and total bookings surpassed $100 million in 2014.
IPO Prospect No. 9: Apttus
Cash is king, right? Absolutely.
Just look at Apttus. The company has pioneered a new category in software called quote-to-cash, which involves using sophisticated workflows and analytics to generate, collect and manage revenues. Some of the features include the pricing of products, service configuration, quote creation, negotiation, contract signings, invoicing, and even revenue recognition.
A key to the success of Apttus has been a strategic partnership to build its technology on the Salesforce.com infrastructure. This has not only accelerated innovation but also allowed for cross-sale opportunities.
In fact, Apttus currently has over 500 customers, which include 100 of the Fortune 500. This is up from about 300 a year ago. The revenue growth rate is 80%-plus and the company surpassed the $100 million level in 2015.
But the opportunity is still in the early innings. According to research from Gartner, the addressable market opportunity for Apttus is expected to go from $31 billion in 2015 to $41 billion in 2018.
IPO Prospect No. 10: Nutanix
Nutanix develops high-end cloud systems that integrate various technologies, such as servers, virtualization and storage. The company calls the approach “invisible infrastructure” because there is constant availability as well as low-touch management.
Since being founded in 2009, Nutanix has not wasted any time in building a strong customer footprint, which is now over 2,100. They include big-time names like Best Buy (BBY), Kellogg (K), Nintendo, Nordstrom (JWN) and Toyota Motors of North America.
Yet the market opportunity is substantial. According to Nutanix’s S-1, the combined spend is over $100 billion.
Besides, Nutanix has continued to crank out strong growth. After all, from fiscal 2013 to 2015, revenues jumped from $30.5 million to $241.4 million.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.