Espial gets it done

The announcement on Friday that Espial had succeeded in its $25MM TSX-only initial public offering is a great success for both the company, its two co-lead underwritiers, GMP and Genuity and VCs VenGrowth and Greylock.

Espial “designs, develops and markets software solutions to enable the delivery of Internet Protocol Television (IPTV). Our products allow communications service providers, including telecommunications, cable TV and satellite TV service providers and Internet service providers, to deploy IPTV services to their subscribers.” Sounds sexy enough (and IPTV is a sexy space), but with $2.2 million in revenue for the quarter ended March 2007, its an unusually small firm to take public. Moreover, raising just $25MM is usually seen to be a small initial float, but with a pre-money value of $40MM you can understand why that was all the capital that the company would want to take on at this stage.

Of late, this type of firm would have sought out U.K.’s AIM market instead. But that isn’t what happened here, and its is great sign of things to come for local tech IPOs.

For the past six years, most local institutional sales desks have told tech CEOs, if they even took a meeting at all:

– “the IPO float needs to be at least $35 million for guys to have liquidity”
– “the pre-money value needs to be at least $100 million for anyone (that’s code for equity research analysts) to pay attention”
– “a 5x trailing run rate revenue valuation is just impossible”
– “why buy tech when the momentum’s in the resource sector?”

But, GMP and Genuity clearly stepped up, and with the help of some recent tech IPO successes (Constellation, Sandvine, etc.) and some plain old share appreciation (Absolute, Wi-LAN and Systems Excellence are but three examples) the buyside is obviously prepared to take a small shot at the IPTV market. The rising tide has lifted a boat or two. And it bodes well for two other tech IPOs currently in the market: Rugged and Terago.

With our investment (along with BDC VC and FTQ) in Bluestreak (they are working with Orange on a mobile TV platform), we are also pleased to see the Canadian buyside show some interest in IPTV, despite the early days of its deployment.

MRM