Welcome to the Lost Decade (for Entrepreneurs, IPOs, and VCs)
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Re: Welcome to the Lost Decade (for Entrepreneurs, IPOs, and VCs)
#2what about companies that never IPO but grow and become successful private entities (and hence, are never acquired)? that seems like a good place to end up
Re: Welcome to the Lost Decade (for Entrepreneurs, IPOs, and VCs)
#3Given that the whole capital structure is in a state of flux right now with the reality of deflation (the exit of money from the system) while massive inflation is going on at the same time (the creation of new money not the increase in prices) why should we expect much of anything good to come out of the next ten years?
I think that a lot of people will take their ideas and implement them on a smaller scale and grow organically instead of getting big fast. This site is filled with people doing or planning on doing just that right now. I'm not optimistic about the next ten years but I think that we'll end up leaving this decade with some rather nice companies that will really contribute something substantial to the ten years that follow this decade. I'm assuming the next ten years will be like 70s with stagflation defining our experience and mainstream economists having nothing useful to say about why it is happening.
Re: Welcome to the Lost Decade (for Entrepreneurs, IPOs, and VCs)
#4what about companies that never IPO but grow and become successful private entities (and hence, are never acquired)? that seems like a good place to end up
That's a great argument. But I think his point was that from the VCs point of view that doesn't look like the kind of fast ROI they're always after.
Re: Welcome to the Lost Decade (for Entrepreneurs, IPOs, and VCs)
#5Given that the whole capital structure is in a state of flux right now with the reality of deflation (the exit of money from the system) while massive inflation is going on at the same time (the creation of new money not the increase in prices) why should we expect much of anything good to come out of the next ten years? I think that a lot of people will take their ideas and implement them on a smaller scale and grow…
I agree that the problem is that web developers don't need funding anymore. Creating a web company is not something "urgent" like it was in the 90s, and it doesn't need large amounts of capital or labor.
The same way small inventors don't need huge amounts of capital, web companies will continue to appear without the need of VC money.
Re: Welcome to the Lost Decade (for Entrepreneurs, IPOs, and VCs)
#6Hmmm, the seismic shift from MoreLikelyToIPO to MoreLikelyToGetAcquired happened around the same time as Enron and its ensuing government yoke, Sarbanes-Oxley. Coincidence? I doubt it.
When compliance raises expenses 1%, no big deal. But if that number approaches 50% for small, nimble, well-leveraged tech start-ups, then public markets become closed to them.
SOX is an awfully big variable to not be considered.
Re: Welcome to the Lost Decade (for Entrepreneurs, IPOs, and VCs)
#7That's scary because Web 2.0 companies aren't the be-all end-all of the world. We're in a decidedly fantastic spot, don't get me wrong. However, people are going to need batteries that last longer, they'll want windows in their houses that change shade, or soil that repairs and replenishes itself (South America looking at you.) This type of thing takes the hard money web companies don't need. It's the real source of growth.
Re: Welcome to the Lost Decade (for Entrepreneurs, IPOs, and VCs)
#8Hmmm, the seismic shift from MoreLikelyToIPO to MoreLikelyToGetAcquired happened around the same time as Enron and its ensuing government yoke, Sarbanes-Oxley. Coincidence? I doubt it. When compliance raises expenses 1%, no big deal. But if that number approaches 50% for small, nimble, well-leveraged tech start-ups, then public markets become closed to them. SOX is an awfully big variable to not be considered.
I think a simpler explanation is that IPOs simply weren't a good idea for most technology firms, which is part of what led to the dot-com crash.
Re: Welcome to the Lost Decade (for Entrepreneurs, IPOs, and VCs)
#9Hmmm, the seismic shift from MoreLikelyToIPO to MoreLikelyToGetAcquired happened around the same time as Enron and its ensuing government yoke, Sarbanes-Oxley. Coincidence? I doubt it. When compliance raises expenses 1%, no big deal. But if that number approaches 50% for small, nimble, well-leveraged tech start-ups, then public markets become closed to them. SOX is an awfully big variable to not be considered.
SOX took effect in late 2002, but the big seismic shift had happened by 2001 (look at the drop-off in IPOs between 2000 and 2001, which never recovered). Seems like the dot-com crash leading to greatly decreased public demand for tech shares is a lot more likely explanation.
Re: Welcome to the Lost Decade (for Entrepreneurs, IPOs, and VCs)
#10Hmmm, the seismic shift from MoreLikelyToIPO to MoreLikelyToGetAcquired happened around the same time as Enron and its ensuing government yoke, Sarbanes-Oxley. Coincidence? I doubt it. When compliance raises expenses 1%, no big deal. But if that number approaches 50% for small, nimble, well-leveraged tech start-ups, then public markets become closed to them. SOX is an awfully big variable to not be considered.
Surely the whole tech bubble is a much bigger factor in this? Although correlation is not causation... :) Here's my thinking:
In the bubble, IPOs abounded and investors were buying whatever shit they could lap up if it had "e" in the name. Post-bubble, tech companies that survived have been successful (by definition) and have sought to absorb smaller companies both to gain technologies and to kill off competitors; whereas investors have been wary of new tech stocks. This alone could explain the shift from IPO to acquisition.
Also, a small, nimble, well-leveraged tech start-up surely doesn't want or need an IPO anyway. An IPO doesn't make sense if you don't need the cash (unless you VC would rather have an "exit" than profits†). It is hard for investors to evaluate the potential of a small tech company; acquisition makes much more sense.
† VCs demanding an exit in a fixed time frame might make an IPO impossible -- is this something that happens? Do any VCs accept dividends instead of a buyout?