IPO Drought: A Crisis for the Start-up Community?
The absence of a single initial public offering by venture-backed companied has investors quite alarmed. The National Venture Capital Association reported this morning that, for the first time in three decades, zero start-ups went public. Here's the story I wrote about the report.
According to the report, 57 percent of the investors surveyed blamed Sarbanes Oxley regulations, which impose very strict accounting and disclosure standards on all publicly traded companies. Fred Wilson wrote in his blog yesterday that the "risks and hassles are just so great."
In an e-mail I received this morning, Todd Dagres of Spark Capital said, "The data is artificial. Facebook and several other privates could have gone public but chose not to. The issue is overall liquidity. If a private company sells to a public company -- it's similar to going public with less risk."
Sure, being acquired by a bigger public company is a sure payday and doesn't involve the same amount of risk. But several investors told me yesterday that it's often the companies that go public that have the best chance of making it big.
"Imagine the implications if Genetech, Google or Intel decided to forgo a public offering and become acquired because the public market option was unappealing," said Dixon Doll, co-founder of DCM in Menlo Park. "The 'next Genetech or Google' may be making that decision right now."
VentureBeat has it's take here, suggesting that the dry IPO market will force companies and investors to look for alternatives. As of June 20, data tracker Dealogic reported that 41 IPOs were pulled since the start of the year.
What's behind the lack of IPOs? Are the regulations to blame, or the struggling economy accompanied by skittish investors? Does this have entrepreneurs worried?
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