Rubicon Project IPO keeps the LA exit train rolling

By Michael Carney , written on April 3, 2014

From The News Desk

The LA Tech exit train continues to roll through 2014 as digital ad automation firm Rubicon Project had a successful IPO yesterday, raising $81.3 million in new capital (shareholders also sold $29 million worth of shares) as its stock traded up nearly 34 percent on opening day to reach a $20.04 per share and a market cap of more than $670 million. The stock is up another 5 percent in early trading today.

Rubicon’s IPO marks the third exit of a half-billion dollars or more for the region in the last two weeks, following the sales of Irvine-based Oculus VR to Facebook for $2 billion and Disney’s purchase of Maker Studios, which was based in Culver City, for as much as $950 million. This year also saw LegalZoom sell a majority stake to Europe’s Permira at a $425 million valuation and EdgeCast acquired by Verizon in a $390 million deal.

Unlike the preceding deals, Rubicon remains an independent company and thus has the prospect of continuing its growth trajectory as a tentpole company for the LA tech ecosystem. Like Maker, Rubicon was backed in large part by local venture capitalists – Clearstone Venture Partners owns 24 percent of the company – making it a win across the ecosystem.

The exit also reinforces LA’s standing as one of the world’s leading ad-tech markets, a crown for which it vies, atypically, with New York rather than Silicon Valley. The current generation of ad-tech giants includes cross-town rival OpenX and follows wins in the prior decade that included Overture – the original paid search advertising company acquired by Yahoo for $1.4 billion – and Applied Semantic – acquired by Google for $102 million as the underpinnings of its pagerank and semantic search platforms.

The question that many observers will ask now is, can LA keep the momentum going? Taken literally, meaning will the region continue to produce half-billion dollar winners weekly, of course not. But the greater LA tech space has a number of companies operating at meaningful scale and seemingly poised for exits in the near- to mid-term (say within 24 months), be they by IPO or M&A. The short list would include: Facebook acquisition target Snapchat, automotive price comparisons platform TrueCar, Intelligent Beauty-owned ecommerce giants JustFab and Sensa, RTB advertising platform OpenX, badass womens’ fashion etailer Nasty Gal, YouTube monetization platform ZEFR, and Jessica Alba and Brian Lee’s eco-friendly household products etailer The Honest Company, among others.

The knock on LA of late has been that its companies build early momentum but often fail to cross the finish line. But Q1 of 2014 should go a long way toward dispelling those, largely misguided conclusions. Sure, as I’ve reported exhaustively in the past, a few high profile companies have gone belly up or fallen from their once lofty perch. But that’s natural in the high-risk startup game. Only in an up-and-coming market like LA, where naysayers are looking for “I told you so” proof do these events even register on the richter scale.

The current iteration of the LA Tech ecosystem is really only about five to seven years old, after the region experienced a lull following the dot-com bust. In that way, it’s only natural that the winners start to pop at this stage. The coming years will certainly feature more busts than winners, but that’s par for the course. Those who want this or any other market to be "the next Silicon Valley" are wasting their time. LA is building its own identity and its own success story.

Predicting the future in this game is a fool’s errand, but given the evidence, it’s not hard to argue that LA Tech is in a better position today than at any point in recent memory.

[Image via lovine, flickr]