That's an obvious conclusion from all the enterprise IPO activity over the past few weeks.
On Thursday, MobileIron became the third enterprise tech company in a month to have a successful IPO.
The company raised about $100 million, selling 11.1 million shares for $9. Investors liked the stock, which closed up 22% at $11.02. And it's still trading around $11 on Friday. MobileIron offers a product that helps enterprises manage their fleets of tablets and smartphones.
MobileIron followed an even more spectacular IPO last week by computer network hardware maker Arista Networks. Arista priced shares at $43 and soared from there, popping over 40% on Day 1. This happened although the company's IPO was surrounded by controversy, including a lawsuit against it by one of its billionaire cofounders and a scandal involving offering stock to journalists.
No matter. Arista was offering investors something rare these days: an already profitable company.
Then there was Zendesk, which debuted on May 15. It raised just under $100 million. Its $9 per share price popped over 40% on its first day, and now, weeks later, it's still trading up, at around the $16 mark. Zendesk offers a cloud-computing help desk/tech support service.
Zendesk and MobileIron, both still in the red, priced their shares in the middle of their range, at $9 each, not the high end. Meanwhile, Arista was able to command $43, far above its original range of $36-$40.
After finishing his roadshow, CEO Bob Tinker told Forbes' Alex Konrad that investors are getting pickier about enterprise stocks, these days.
This is the chart that is concerning them, which shows a market down by 20% since a peak in February, according to the BVD Cloud Computing Index, which tracks 37 publicly traded companies that offer cloud-computing services to enterprises.
Tinker told Forbes,"Enterprise technology investors right now are discerning, and that's the way it should be."
Investors want to see that an enterprise company is not just growing revenues by adding customers, but is getting more revenue from each customer over time.
That's because there's a massive change in how enterprises are buying technology. They're shifting away from signing huge up-front contracts. They are signing up for subscriptions instead.
And that means that tech vendors will stay in the red longer, needing more time to recoup the costs of acquiring customers. If they can keep customers happy, so they don't cancel subscriptions, they are, however, supposed to make more money from each customer over time. The promise is, eventually, they'll hit the black with a boom.
Investors want to grab their share as this new business model takes root. But, like Tinker said, they have learned to be more discerning.