Source: Renaissance Capital

The slumbering market for initial public offerings shows signs of awakening, but experts can’t predict how long the grogginess will linger. Just two Washington companies have completed initial public offerings in the past 24 months: Seattle biotech Omeros and Bellevue insurance firm Symetra Financial.

The IPO drought in Washington state actually has been going on for some time. Over the past nine years, only 12 venture-backed companies have completed IPOs. That compares to 1999 — the peak of the dot-com bubble — when 14 companies went public. Most of the IPOs in the state occurred between 1995 and 2000 when a total of 49 companies completed public offerings.

Nationally, the outlook has been equally grim.

Since the beginning of 2008, 119 companies have conducted IPOs, according to Renaissance Capital's IPOHome.com. That compares to 272 companies that went public in 2007 alone.

The news is even worse for those companies that have taken on venture capital financing. Only 13 venture-backed companies in the U.S. went public in 2009, prompting National Venture Capital Association president Mark Heesen to say that it was a year that "many venture capitalists and entrepreneurs would choose to soon forget."

In fact, when you combine the six venture-backed IPOs that occurred in 2008 with last year's totals, the last two years mark the slowest period for venture-backed public offerings since Gerald Ford's first two years as president (1974 and 1975).

Industry watchers are somewhat mixed on where the IPO market is headed. The NVCA's Heesen, for one, issued a pessimistic warning when he attended a venture capital event in Seattle last December.

"Until we see 100 companies in registration, at least, you are not going to have a vibrant IPO market," said Heesen, who predicted tough times throughout the first half of this year. "I hope the lawyers are right. But I have yet to see this deluge of companies going to register."

Source: Renaissance Capital

However, there are some glimmers of hope. From the start of the year to today, 29 companies had filed to go public. That compares to just three companies which had done so during the months of January and February of last year, according to Renaissance Capital.

Last month, Bellevue-based Motricity -- a provider of hosted services to wireless carriers -- filed to raise up to $250 million on the Nasdaq. Other Washington companies that have active filings on the books with the Securities and Exchange Commission include online background check operator Intelius and construction firm InfrastruX, both of Bellevue.

Seattle attorney Dave McShea, a partner with Perkins Coie and co-author of the Initial Public Offering Handbook, said he's noticed an uptick in Pacific Northwest companies thinking about IPOs. But he's still cautiously optimistic when it comes to how 2010 will shake out.

"A number of Northwest companies here have not only survived the recession, but thrived, and would make great IPO candidates," said McShea. "But we also need the public markets to cooperate. If the public markets hold up and U.S. companies doing IPOs trade well in the after-market, then I think you'll see more IPOs filed and done in the Northwest. If the public markets falter or recent IPOs trade down, that will create a headwind."

McShea

One factor that could supercharge the market would be the emergence of a blockbuster IPO. Historically, the tech sector has been buoyed by the emergence of pioneering companies that have rolled the dice in the public markets, notably Netscape in August 1995 and Google in August 2004.

The 2010 version of that could come in the form of Facebook, the social networking powerhouse which some have argued could set the stage for a rebirth of sorts in the moribund IPO market.

Other companies that could help crack open the window are LinkedIn or Twitter, though the upstart online communications service is a bit of a long shot. Nonetheless, an analysis from Renaissance Capital earlier this year noted the possibility that one of the social networking companies could help energize the IPO market.

"With many venture firms putting IPO plans on hold early in 2009, we could see a number of notable growth IPOs in 2010, including at least one of the big social networking sites," Renaissance Capital wrote in its 2009 review. "The bottom line is that the VC supply is large, and mounting pressures for liquidity on one hand and a growing appetite among investors for growth on the other should widen the IPO funnel for this important segment of the new issues market."

It is unlikely that a company from Washington state will kickstart the overall IPO market. Nonetheless, venture capitalists say they expect a slight increase in activity this year.

Some of the companies that have been discussed as possible candidates include Big Fish Games and WildTangent -- both large distributors of online games -- as well as biotech companies such as Alder Biopharmaceuticals and Light Sciences Oncology.

Varolii, a Seattle software company which withdrew its IPO filing in 2008 due to tough market conditions, is another possibility. And the Cobalt Group, which sells online marketing tools to automotive dealers and groups, also might give the public markets a whirl again.