Banking & Finance and Technology

BEHIND THE NEWS: Pending IPOs bode well for tech startups of tomorrow

January 28, 2008

Initial public offerings often are bonanzas for company management and other insiders. In the case of Aprimo Inc. and ExactTarget Inc. -two Indianapolis software firms on deck to go public-a throng of local business and technology leaders who provided early financial backing would see a rich payoff as well.

Filings with the Securities and Exchange Commission show the companies snared as investors a who's who of Indianapolis business, from former venture capitalist Bob Compton to financial adviser David Knall and technology executive Scott Webber.

If they pocket rich profits on Aprimo or ExactTarget, they may roll gains into other technology upstarts hungry for capital.

"You can't say what everybody is going to do" if they collect a payoff on a technology investment, said local technology leader Mark Hill, who manages the investment firm Collina Ventures. "Some people might buy a new Porsche. But people who have success in it, and have capital to deploy, are apt to do it again."

It's a virtuous cycle that bodes well for the city's fledgling technology sector, and it's been gaining momentum for more than a decade.

One of the early breakthroughs: Locally based Software Artistry Inc.'s $200 million sale to IBM in 1997. Then there was the 1999 IPO for locally based Interactive Intelligence and, more recently, a spate of buyouts, including the 2005 sale of Hill's Carmel-based banking-software firm, Baker Hill.

Hill was one of the earliest investors in Aprimo, a marketing-software firm launched a decade ago. He said he chose to invest because he believed in CEO William Godfrey, a former Software Artistry executive.

Doubling up

Compton helped fund both companies and is chairman of ExactTarget, a maker of software that helps clients create, target and deliver permission-based e-mails. A long list of other technology executives has money in one or the other, the SEC filings show.

Compton, who now lives in Memphis, could not be reached. But he told Midwest-Business.comlate last year that 2007 "marks my 20th year of investing in earlystage, high-tech companies in Indiana. My vintage investments from the 1990s are now all bearing fruit."

He's seen the wealth-building power of IPOs firsthand. Compton was a director of Interactive Intelligence when it went public at $13 a share. Those who got in early saw the biggest payoff, as is typically the case in investing. Regulatory filings show that investors before the IPO paid an average of just $1.01 for each share.

Beyond that initial pop, companies going public have the potential for longterm price appreciation.

But there are no guarantees, as Interactive's performance shows. It's had a topsyturvy ride, with investors who cashed out at the right time able to pocket big gains. But 2008 has been brutal-the company's stock has shed nearly half its value, leaving it only a hair above the IPO price.

Both Aprimo and ExactTarget disclosed their plans to go public last fall, before the stock market turned moribund. Neither has revealed details, such as the selling price for shares. Aprimo estimates it will raise $50 million, while ExactTarget projects $86 million.

Investing in people

Some prominent investment pros already are in. SEC filings show David Knall-a financial adviser with Stifel Nicolaus & Co. whose team oversees $6 billion in assets-has money in both companies.

Brian Cooke, managing director of Wachovia Securities' Cooke Financial Group, said he invested in ExactTarget around the time it launched in 2000-largely on the strength of his friendship with CEO Scott Dorsey, whom he'd gotten to know when both were students at Indiana University in the late 1980s.

"I really believe in Scott Dorsey," said Cooke, whose group oversees $1.3 billion in assets. "He is such a hard worker and an honorable guy. I knew he would be successful."

Let's hope ExactTarget's Dorsey and Aprimo's Godfrey don't disappoint as they step onto the public stage. The wealth they're poised to create would help stoke the breakthrough technology companies of tomorrow. It's all about building on successes.
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