No VC-Backed Companies Go Public In Q2

from the first-time-in-30-years dept

It's rather surprising to find out that, for the first time in about thirty years, not a single venture-backed company went public last quarter. Even in the worst of the various downturns that have happened over the past thirty years, there were always at least a few venture-backed companies that were able to make it out. This news has some folks fretting about what it means for the VC community -- with many pointing out that a bunch of VCs have moved away from "quick flip" internet investments into more long-term alternative energy bets.

I'd also guess that Sarbanes-Oxley has a lot to do with this. Going public is a lot less appealing these days thanks to the expenses required under that law. Rather than "cleaning up" the market, it's basically made going public a toxic process, so that everyone stays private and looks for acquisition opportunities. That said, it was obvious during the boom years that companies were going public way too quickly -- and being a public company is no picnic, with the required short-term thinking it demands.

So, what happens instead? There's been some talk of creating some sort of middle road. Rather than taking companies fully public, or selling them off to big players, what about a limited market of private equity investors who would let some of the original VCs and founders cash out, while keeping the company away from public market reporting requirements? This could potentially make a lot more sense for all involved. It basically adds another layer between VCs and the public markets where the private equity guys could either eventually take the company public or sell it off themselves. Even if this doesn't really work out, one thing is pretty clear: VCs will find a way to get money out of investing in startups, even if it's not in taking companies public.


Reader Comments (rss)

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  1.  
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    Anonymous Coward, Jul 1st, 2008 @ 1:05am

    "I'd also guess that Sarbanes-Oxley has a lot to do with this."
    It's not a very good guess but it is your only guess : the article is just an excuse to knock SOX which your commentators have established you have never understood.

     

    reply to this | link to this | view in thread ]

  2.  
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    Mike (profile), Jul 1st, 2008 @ 1:38am

    Re:

    It's not a very good guess but it is your only guess : the article is just an excuse to knock SOX which your commentators have established you have never understood.

    Hmm. Well, actually, no the article isn't just an excuse to knock SOX. You don't think it's interesting that no VC-backed startup has gone public for the first time in 30 years? That seems worth commenting on.

    Also, the focus of the post was on what the lack of an accepting public market might mean for VCs, with the conclusion that they would adapt, whether or not SOX is there.

    So to say that this is just bashing SOX suggests that you didn't even read the post.

    As for not understanding SOX, I'd disagree, but it's not like you presented any evidence, so my guess is you're just trolling. If you'd like to actually discuss the facts, we can do that, but given what you wrote, my sense is you don't want to discuss. Your comment was "just an excuse to knock" me. Except you failed. Miserably.

    Would you like to try again?

     

    reply to this | link to this | view in thread ]

  3.  
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    Steve R. (profile), Jul 1st, 2008 @ 6:33am

    Sarbanes-Oxley Irrelevent

    As has been pointed out many times, regulations have a tendency to foster innovation by coming up with new innovative ways to get around them. Sarbanes-Oxley gets kicked around quite a bit, but it didn't save us from the current meltdown in the financial stocks. I would guess that no VC backed firms went public since the shills couldn't find enough marks with any money left.

     

    reply to this | link to this | view in thread ]

  4.  
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    Sean, Jul 1st, 2008 @ 8:10am

    SOX??

    But SOx has been around for years now, so what's the problem with this Q2 that wasn't a problem previously? Hello Credit Crunch!
    I've recently been in Dublin for business, and I was shocked by how little work is going on in the various big building sites around the city (as opposed to the level of activity just 3 months ago). All the big jobs seem to be on hold, with thousands of constructor workers out of work.

    As a CISSP-certified former IT security guy, the main effect of SOx is to make executives sweat that all the BS they're spinning can be backed up with plausable denial. Most of the work I was involved in around SOx had little to do with increasing transparency and everything to do with covering the proverbial.

    In that regard, it's definately had a negative effect on floatations, 'cos now the VCs can't dump crappy companies on the exchange and run with the money, leaving the poor saps who invested taking the hit when the dodgy accounting bites back.

     

    reply to this | link to this | view in thread ]

  5.  
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    PRMan, Jul 1st, 2008 @ 8:58am

    Further proof that the cure is worse than the disease...

    I'm sorry, but SOX was about the stupidest legislation in history. Instead of the investors of 1 or 2 already-known shady companies' investors being harmed, now all companies are harmed a fraction of that instead.

    The result?

    No innovation, because it's become too difficult. Be prepared for even more quarters with few to no VC-backed startups.

     

    reply to this | link to this | view in thread ]

  6.  
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    Steve R. (profile), Jul 1st, 2008 @ 1:16pm

    Re: Further proof that the cure is worse than the disease...

    How wrong. SOX promoted innovation. Those who scheme to separate us from our money are very innovative when it comes to finding ways to circumvent legislation.

    In a sense you are correct. SOX was the stupidest legislation in history since our financial institutions were able to create financial instruments (CDO) that were nothing more than a pyramid scheme. The companies are harming themselves through improper risk management and improper accounting, the legislation is not at fault.

     

    reply to this | link to this | view in thread ]


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