A piece from 2000, the good old days

An interesting detail about the recent Zynga IPO was that the company priced its shares at $10, well below the $14 a share backers like JP Morgan paid in the social gaming company's last round of private funding.

Writing on his blog today, Fred Wilson argues that the recent public offerings for Zynga, Groupon, Pandora, LinkedIn and others have been rational. The companies  have seen some volatility, but they haven't jumped to insane highs and then plummeted to zero.  "I was on the boards of some companies that went public in 99/00 and they were not ready," wrote Wilson. "I learned that lesson the hard way."

Mr. Wilson notes the fact that these companies went public at prices lower than their last round, but doesn't make much of it. Over at Elapsed Time, Hunter Walker explores some interesting questions around this issue. "Will "Series D" later stage funds look for downside protection in the future, e.g. warrants that convert to more shares if an IPO occurs at a valuation below their investment (a form of preferences similar to traditional venture investors)?"

As Phil Black of True Ventures wrote, this is egg on the face of the investors who must now go to their LPs and write down the value of their investment. "I don’t think we are going to be the only group owning Zynga facing that odd situation of your portfolio company going public only to write down your investment!"

And as Mr. Walker notes, this may be further encouragement for employees to leave companies before the IPO so that they can sell their shares at the lofty valuations found on the private markets. "If IPOs are seen as valuation risks -- that is, the public market is a harsher judge of value than private markets (because of more perfect information, because there's more liquidity, etc) -- then why wait for the IPO? Get out now, make your money and pay off the student loans, buy a house, etc. Who would have thought that the most successful companies would be seeing pre-liquidity retention issues!"

Its got to be state of the art!

Some of the nation's biggest banks and venture investors have partnered with New York City Investment Fund to create the FinTech Innovation Lab.

The program is a annual twelve-week incubator to find and foster promising startups working on financial technologies.

Participating banks include all the big boys — Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Bank of America.

"What's really great and unique about this program is that the startups involved get to work directly with the chief technology officers from the nation's top financial institutions," says Maria Gotsch, CEO of the NYC Investment Fund.

Startups will need to have an alpha version of their technology to be considered. Applications are due by the end of Janurary, with the program slated to begin this May.

"For entrepreneurs targeting the financial services sector, this program is a unique opportunity to get access and feedback from potential users and funders," commented Fred Wilson, board member of New York City Investment Fund and Managing General Partner of Union Square Ventures. "This type of market input is invaluable."

In other words, this is a killer opportunity for startups to get on the fast track with some of the biggest players in the $14 billion market for banking and securities software.

bpopper [at] observer.com | @benpopper