3 Companies for Your IPO Watchlist

Welcome back to another look at the Baby Breakers that could become tomorrow's multibaggers. This time, I'm taking a look social networking, online travel booking, and a better way to convert power.

But before we look ahead, let's take another look back.

  • China Medical Technologies (Nasdaq: CMED  ) has been a disappointment since its August 2005 debut, down more than 48% versus a 6% gain for the S&P 500 over the same period. Such is the danger of investing in Chinese small caps.
  • NetSuite (NYSE: N  ) didn't get much love when it filed for a $75 million IPO in July 2007. Today, the company is has seen its stock rise more than 200% in the past year. The wrinkle? NetSuite went public in December 2007, before the 2008 crash. The stock's modest 1% gain in the years since handily beats the S&P's 12% decline over the same period.

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Now, as promised, here's a closer look at three companies that recently received funding. Each one is targeting an incumbent tech industry.

Company

Recent Funding

What It Does

Whom It Disrupts

Foursquare $50 million Location-based social network. Google (Nasdaq: GOOG  )
Qunar $306 million Travel-specific Chinese search engine. Ctrip.com (Nasdaq: CTRP  )
Transphorm $25 million Devices for reducing the amount of power lost during conversion. Power-One (Nasdaq: PWER  )

Sources:  TechCrunch's funding rounds database.

Chances are you know Foursquare. The location-based network has been around for several years. At one time, I billed it as the new Twitter. More recently, the company has become a popular platform for the delivery of local advertisements.

American Express (NYSE: AXP  ) has partnered with Foursquare to offer rebates to those who check in while shopping with the card at select merchant locations. Groupon is also partnering with the company for on-location discount offers. Seeing all this business momentum, a group of venture-capital investors invested $50 million in a new round of funding. Participants included Andreessen Horowitz, O'Reilly AlphaTech Ventures, Union Square Ventures, and Spark Capital, TechCrunch reports.

Qunar.com is a search engine for helping Chinese travelers find deals. The idea is disruptive in that it's aggregating results and allowing travelers to choose the best deals. By contrast, Ctrip is a booking engine on the order of Expedia or Orbitz Worldwide. These and similar sites tend to take a 15% booking fee. Qunar makes its money from display advertising and transactional clicks. More than 30% of airline tickets booked in China are now booked through Qunar, board member Richard Lim told Fortune in a recent interview.

Both Google and Baidu (Nasdaq: BIDU  ) have worked with Qunar for years, and at one point the company was approached about an acquisition, Lim said. Insiders turned away the offer at the time, choosing instead to focus on organic growth. But with scale comes the need for additional investments, and Qunar's latest is a whopper: a $306 million pledge from Baidu in exchange for a majority interest. A takeover and eventual public spinoff seem likely to me.

Finally, Transphorm is working on gallium nitride-based power converters that are more efficient than silicon rectifiers. The idea, CEO Umesh Mishra told TechCrunch in February, is to recapture the 10% or so of the power lost during conversion for commercial use. If successful, the savings could reach into the billions for the biggest consumers of power -- data centers and telecommunications operators, notably.

Investors love large numbers, and Transphorm's proposed innovations has attracted another $25 million in a series D round of funding, completed this month. Kleiner Perkins Caulfield & Byers joined with Google Ventures, Foundation Capital, and Lux Capital to fund the round.

See anything I missed? Which Baby Breakers do you like most? Let me know using the comments box below. And if you're interested in learning more about how the Internet is transforming business models and giving rise to new Baby Breakers, take a minute to watch this free video right now. You'll walk away with a stock idea from our Motley Fool Rule Breakers scorecard and a richer understanding of the cloud-computing revolution.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Akamai and Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Google, Ctrip.com, and Power-One. Motley Fool newsletter services have recommended buying shares of Ctrip.com, Baidu, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On June 29, 2011, at 7:16 PM, Gylesey wrote:

    I think you need to re-check your facts on the NetSuite IPO: N floated at $26 then (after some initial hysteria where it shot up to about $45 and quickly sunk back down) was hovering around the $20 mark pre 2008 market collapse which puts it at significantly better than a 1% return!

    disclosure: I got shares in the IPO and am long N.

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