Why Silicon Valley Doesn't Need Wall Street

from the go-away dept

Business 2.0 has an interesting opinion piece explaining why (despite the common belief) Silicon Valley doesn’t need Wall Street. He points out that most tech companies, honestly, don’t need much capital. Sure, when it was being thown at them, they took it – but they didn’t really need it. The only thing that they tend to “need” Wall Street for is to go public – and right now even that’s close to impossible. The article then goes a step further to point out (as we’ve pointed out hundreds of times, even when the boom was in full swing) that even with IPOs, Wall Street is really stealing a ton of money from startups by underpricing the shares. The way around this is to go with an open auction style system, such as the one that W.R. Hambrecht offers – because it fairly prices the shares, and makes for a much fairer allocation. The problem is that thanks to Wall Street’s entrenched interests, no one pays much attention to the few companies that have gone this route. It would need a really big player to go public this way to legitimize it. There is, of course, a clear target to make this move: Google. When Google finally does decide to go public, it would make quite a splash in the Wall Street status quo pool if they decided to go with an auction style IPO. It’s also exactly the type of move Google would make. Hopefully, this article will get them thinking in that direction.

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