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.

Filed Under: ipos, public markets, q2, venture capital


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  1. identicon
    Sean, 1 Jul 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.

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