Public Markets

When An IPO Is Or Isn’t Tech, And Why

TL;DR: The CarGurus and Switch IPOs saw two tech companies not get much love from the traditional tech press. There are reasons for why that is, and it’s a good moment for us to examine our own biases.

This week brought us two tech IPOs: Switch and CarGurus.

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Both were certainly tech IPOs if we counted Blue Apron as such, so it’s worth taking a moment to understand why these successful offerings mostly fell under the radar.

To get there, we need to define the difference between a tech company and an IPO First. As it turns out, there is a slight difference.

Biases And Other Admissions

Which IPOs should the tech press cover and focus on? Here at Crunchbase News, we narrowly stare at tech debuts that land on US-based exchanges, with some exceptions. If a tech company, foreign or domestic, lists here in the States, we try to add it to our list. And if a company that we find to be particularly interesting lists abroad, we take a look. HelloFresh, based in Germany, and Rovio, based in Finland, are examples of non-domestic tech offerings we both cover and track after launch.

But what counts as “tech” is interesting. Blue Apron was considered a tech company while private, raising money during its startup-phase at valuations that made sense for a tech company. But, as it turns out, the public market felt different, deciding that the firm is not a tech company after all. Blue Apron now trades with a revenue multiple similar to a chain of grocery stores.

That is hardly SaaS territory. But all the same, we count Blue Apron as “tech” on these pages, likely due in part to its investor list. First Round and Bessemer were in Blue Apron’s Series A. Bessemer led its Series B. That sort of tech money behind a tech-enabled consumer service can make it look like a tech company—especially when it grew like a software company for several years. In the moment, something that might be better called tenuously tech can look like a straight tech play.

I hope that explains a bit why Blue Apron makes the list of tech IPOs we are tracking this year.

Switch And CarGurus

To reprise: If Blue Apron is a tech company, then both of this week’s offerings are most certainly tech companies.

No one is going to complain that Switch, a data center concern, isn’t a tech company. It is, of course, an infrastructure tech company. Therefore, it’s less exciting than Snap, but it’s still decidedly inside the domain of tech. Switch also raised from Intel Capital.

But CarGurus, the second IPO from this week, is tougher to slot. This is for a few reasons. First, it was relatively unknown to the tech press. That matters in terms of narrative setting. If you aren’t picking up mentions in the pages of the publications that set market expectations for tech startups, then, of course, you are going to be lower-profile. Secondly, the firm deals with used cars, a substance that isn’t tech-focused by nature. And, the firm didn’t raise any venture capital that we know of before going public as a profitable, growing company. (I won’t make jokes here about profitable companies not being tech IPOs due to having positive net income, as that would be rude.)

But CarGururs is a tech company. From its S-1, the following:

CarGurus is a global, online automotive marketplace connecting buyers and sellers of new and used cars. Using proprietary technology, search algorithms, and innovative data analytics, we believe we are building the world’s most trusted and transparent automotive marketplace and creating a differentiated automotive search experience for consumers.

A marketplace company that uses big data to drive consumer efficiency? That is as tech as $10 toast is San Francisco.

When CarGurus went public, however, its march to IPO wasn’t given the usual tech press treatment. Not that that is a particular sin, per se, but it was notable all the same.

CarGurus’ debut was a big success in terms of initial performance, as was Switch’s own first day.

So both are tech and both are on our spreadsheet. As an additional caveat, Axois’ Dan Primack had a note today on the matter that I think is worth snagging for ourselves:

Yesterday there was some Twitter talk about the lack of tech media attention paid to the CarGurus IPO, particularly as the Boston-based company’s shared soared more than 60% on their first day of trading […] Part of this may be basic geographic bias (i.e., CarGurus isn’t based in SV or NYC).

That’s a great additional point to add to our mix of addmited biases. We could go on, of course, noting that bigger IPOs will get more coverage and love than smaller offerings, and so forth. But I think we made some progresss on our questions.

We’ll reprise this post on occasion when we have a company, or even a few companies, going public that test the various bounds of our rules. Until then, we could sure use some more IPOs to write about.

iStockPhoto / Langotastic

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