Wayfair goes public and raises $304.5 million, will start trading on Thursday

Wayfair founders Niraj Shah and Steven Conine (courtesy of the company)
Wayfair founders Niraj Shah and Steven Conine (courtesy of the company)

Wayfair Inc. raised $304.5 million Wednesday night in its initial public offering, the first in a wave of tech companies from Boston’s innovation community that will hit Wall Street with high excitement and high expectations.

The online retailer of home goods priced its shares at $29 each, giving Wayfair a stock market value of around $2.4 billion when it begins its first full day of trading as a public company on the New York Stock Exchange Thursday. In addition to its namesake website, Wayfair also operates the online retail outlets Joss & Main, DwellStudio, All+Modern, and Birch Lane.

The company sold 10.5 million shares while insiders offered another 500,000 of their own shares, raising the total value of the IPO to $319 million.

Close on its heels is HubSpot, a Cambridge maker of marketing software, which is expected to raise somewhere around $100 million in an IPO pegged for next week. Other Boston-area tech firms reportedly planning to go public include Actifio, which provides data management, web-software provider Acquia Inc., and computer security firms Veracode and Bit9, Inc.

While Boston has been cultivating a young technology industry for some time, most of the startups that have gone on to become public companies in the past several years have been from the biomedical sphere. Just this year alone 18 biotechs from Massachusetts have gone public.

Many in Boston’s technology community see Wayfair and HubSpot as “pillar companies,” anchors of the tech community that will have a large workforce and attract outside talent.

Such companies, in the words of Lee Hower of NextView Ventures, serve as “a training ground for entrepreneurs,” and draw even more venture investment to seed the next generation of startups.

“Having large stand-alone publicly traded companies is good for the tech ecosystem,” Hower said.

Massachusetts was once the epicenter of the computer industry, but in recent years its technology community has splintered and diversified. Meanwhile most of the brand names in tech these days have been launched out of Silicon Valley. In 2013, not a single Internet or computer tech company from Boston went public.

This year some smaller local tech firms have made their way to Wall Street, including Care.com and Imprivata Inc., but their IPOs did not generate nearly as much buzz and anticipation as Wayfair and HubSpot.

Wayfair is the largest public debut of a local Internet company since TripAdvisor was spun out of Expedia in 2011 at a valuation of about $4 billion. Another signature local company, Zipcar, raised $174 million in its initial public offering 2011; Care.com’s raised $105 million earlier this year.

Indeed, Wayfair would be a grey eminence of the city’s burgeoning innovation community. No startup, the company was founded 12 years ago by Niraj Shah and Steve Conine as a collection of niche furniture websites, and with 2,000 employees is much larger than the typical venture-funded tech business. After operating scores of websites under name CSN Stores LLC, the company reorganized as Wayfair in 2011, streamlined its product offerings and also acquired DwellStudio of New York.

Its growth since that restructuring has been torrid, nearly doubling revenues in three years, and poised to surpass $1 billion in annual sales in 2014.

“Wayfair is the story of incredible vision and perseverance from two very smart guys who then went on to build a domestic powerhouse in that space,” said Jon Auerbach, partner at the Boston venture firm CRV. “They did it the old fashioned way, paying very close attention to every penny in and out, and the customer experience.”

Kathleen Smith, principal at IPO ETF manager Renaissance Capital, which closely follows IPOs, predicted Wayfair should be well-received on Wall Street.

“I think investors will look at it and feel it has a solid business and it’s an underserved market because brick and mortar” furniture companies “don’t have a vast selection and they can,” Smith said.

Related:
“The real reason Wayfair’s IPO is such a big deal”
“Where HubSpot and Wayfair may rank among Boston’s biggest tech IPOs”
“From the archives: Wayfair’s weirdest stuff”

Dennis Keohane was a Senior Staff Writer for BetaBoston.
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