The Poor, Pilloried, Tech IPO
A decade ago, tech IPOs ruled the stock markets and Silicon Valley. They were the end-all and be-all for ambitious entrepreneurs and venture capitalists looking to become instant billionaires, or at least millionaires. That was many booms and busts ago. The IPO market never came back, and the multiple financial meltdowns which brought on Sarbanes-Oxley and other regulations made going public even less appealing to shoot-from-the-hip entrepreneurs. The founders of the most successful tech companies today—Facebook, Skype, LinkedIn—are pushing off the inevitable IPO for as long as possible. And for smaller tech companies, IPOs seem hardly worth the bother.
And those companies which are going public simply are not the cream of the crop. IPO returns across all sectors this year are down 3 percent, according to Renaissance Capital. And over the past three years, IPO returns are basically tracking the S&P 500, which hardly justifies the added risk of investing in them. Even venture capitalists are souring on IPOs. In a post this morning titled “IPOs Just Aren’t What They Used To Be,” Fred Wilson laments:
The cost is just too high and the benefits are just too low for most companies these days.
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