There's clearly been a lot of buzz in Silicon Valley the past few months, and people are talking about how the money is flowing from VC purses up on Sand Hill Road into any old startup that has an AJAXy website with rounded corners and a funny name. However, what may be most interesting is that all of this is happening without much help from the IPO market. Back in 2004, when Google went public, there was a lot of talk about how it would open the IPO window back up, creating exit strategies and convincing stingy VCs to invest again. But... that's not happening. Instead, there's a healthy acquisition market (well, depending on whose health you're talking about...). There are a bunch of theories as to why this is happening, with the amazing nuisance that is Sarbanes-Oxley being one of the big contenders for keeping many startups private. Also worth noting is that many of the VC firms that raised tons of money at the close of the last bubble are running out of time to invest it, based on the terms of their funds, and that's creating pressure to put the money to work, even without the clear exit strategies. The real answer may be a combination of all of this. VCs have to invest, but without a big IPO window (in part due to regulations), they're pushing for faster acquisitions instead. Or, of course, you can go with the optimistic viewpoint that the lack of IPOs means that Wall Street has finally learned not to take junk startups public, preferring to wait for real businesses. It's a nice thought, but there have been enough investment bubbles over the years to make it pretty clear that these are not the types of lessons that really seem to stick once enough money starts flowing. And, despite all the "lessons learned," we are still seeing a few of these questionable IPOs make it through. The end result may still be better for the overall stock market -- since fewer bad deals are making it out, but it's hard to buy that it's because of some sort of "restraint" on the part of Wall Street.
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