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Summary:

Silicon Valley has to get over its initial public offering anxiety, according to Benchmark Capital’s Bill Gurley, and it needs to do it fast. What could help? An initial public offering by Kayak, the travel service, which filed for a $50 million IPO today.

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In the words of Benchmark Capital’s Bill Gurley, Silicon Valley has to get over its initial public offering anxiety, and it needs to do it fast. And what could help? An initial public offering by Kayak, the online travel service, which filed for a $50 million IPO today.

Kayak is an online travel search engine that aggregates information from hundreds of travel sites. Successful public offerings of well-known web companies like Kayak often have a psychological impact, allowing an average person to get excited about something that’s part of their daily life. That is one of the reasons why Google, single-handedly re-energized the IPO market and why people have high hopes for a Facebook IPO. With companies like Zynga and Facebook sitting on the sidelines, the focus has to turn to players just one rung below them.

We’re already seeing an uptick in IPOs. Leaving aside pharmaceutical and biomed start-ups, there have been 25 VC backed technology IPOs this year, up from 12 last year and five in 2008. But a successful public offering by Kayak can show the skies are clear for start-ups and the recent trend is a solid one, even if holdouts like Facebook don’t jump in.

How successful will the Kayak IPO be? It’s not very clear, but the company has been on a tear. Here’s a quick rundown of Kayak’s operations from its S-1 filing:

  • Kayak brought in $128 million in revenue in the first nine months of this year, through Sept. 30, a 48 percent increase over last year.
  • In the third quarter 2010, Kayak generated $48 million. Net income, however, dropped to $6.2 million in the first three quarters of this year, down from $10.4 million last year.
  • During the first three quarters, Kayak processed more than 469 million travel queries.
  • Kayak operates in 14 countries and has 140 employees.

But as it grows, Kayak has a lot of challenges:

  • ITA  provided 42 percent of Kayak’s airfare query results in the first three quarters of this year, and Google is buying ITA. Google can block access to ITA data once the deal closes. Since airline travel queries accounted for approximately 85 percent of the searches on Kayak, it could be bad for the company.
  • Now that Kayak has proved to be successful, Google and Bing are coming after company’s bread and butter business.

Despite the potential risks, Kayak has done a good job positioning itself in the travel market. The company set itself up to take advantage of the shift as consumers spend more time discovering travel deals. Kayak has pushed hard to reach non-PC devices with mobile apps available last year. The company’s strength earned it a $750 million valuation in the eyes of NextUp Research in March.

When it comes to solving Silicon Valley’s IPO anxiety, Gurley put it best when he pointed out the problem could be “self-correcting.”

Skype and ZipCar have filed, and all indications are that LinkedIn is working on its own filing. There is also a good chance that companies like AutoTrader and eHarmony will go public soon, and there have been multiple rumors of IPOs for companies such as Hulu and Pandora.

You can soon add Kayak to that list.

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  1. It seems more than a little strange that Kayak would file an IPO at the same time that it admits its entire business model is threatened by Google/ITA.

    Plus why would anyone invest in a price comparison site with such strong ties to two particular companies (Orbitz and Expedia). Surely there’s a conflict of interests there.

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