A local e-commerce analyst has claimed Australian technology companies which bypassed normal business growth strategies in search of IPO gold are now seeing the chickens coming home to roost as investors desert all but the soundest of business models.
Brooke Galloway, IDC's senior analyst, Internet and e-commerce strategies, claimed the technology stock "shake-out" will continue in coming months. While observing that just about all technology stocks suffered from the April "market correction", Galloway said those affected most will be "the ones without real revenue streams".
"Of the 35 technology related companies listed on the ASX this year, 26 (59 per cent) are currently valued under their original listing price," Galloway said.
"Companies with a long-term vision and cash flow will survive the shake-out and will continue to provide sound investment choices.
"It seems that the values of the old economy may return as companies with profit-oriented business models and lean balance sheets will be rewarded," Galloway added.
Despite being "relatively immature", local venture capitalists offer a "much better deal" to fledgling technology companies looking for investment funding, according to Galloway.
"Venture Capitalists typically have a higher level of strategic interest in their investments than a public investor does," Galloway said. "They tend to bring proven business knowledge and other added-value capital to a startup.
"Companies needing funds are better off with a few rounds of venture capital raising to help develop ideas and concepts into profitable business models rather than looking for a once-off injection of cash from a public listing.
"Once a business model has been proven, then and only then should companies consider a public listing," Galloway concluded.