Will A Fear Of Going Public End The Innovation Boom?
from the money-makes-the-world-go-'round dept
We’ve seen similar articles a few times in the past, but the NY Times has yet another story about how startup execs are less interested in going public than in the past, and suggests two key reasons:
- The regulatory nightmare of going public, means that it’s all paperwork and lawyers, rather than focusing on growth, innovation and markets. Sarbanes-Oxley remains a key problem here.
- For startup founders, it’s become a lot more tempting to just sell out to someone big — because it’s a lot easier, but can still earn you enough money to totally change your life.
Again, neither of these issues are all that new, but a decade ago, the focus for most startups was very much on building companies that could go public and standalone. Admittedly, in the dot com insanity, a ton of startups went public that had no business whatsoever being public standalone companies, but there’s reason to fear that we’ve gone too far in the other direction.
Real innovation depends on creative destruction, as newer startups come up and take over from the old legacy players. That’s where innovation really thrives. And, while I don’t think all great companies need to go public, it could be problematic if each great startup instead just sells out to the legacy players from the last generation. Those companies are often where new innovations go to die, rather than to thrive. This doesn’t mean we should go back to allowing just anyone to go public, but if we make it so difficult for good innovative companies to go public on their own that they’re forced to sell out to other companies, we definitely lose some of the creative destruction that has made Silicon Valley and the tech industry thrive in the past.