Washington Is Killing Silicon Valley • Hacker News Board

Re: Washington Is Killing Silicon Valley

#11

Post by ohhmaagawd » Mon, Dec 22, 2008, 4:02 PM UTC

beastman82 wrote: post #9

Herring wrote: post #5

Earlier quoted context omitted.

But clearly something has changed. FTA: "According to the National Venture Capital Association, in all of 2008 there have been just six companies that have gone public. Compare that with 269 IPOs in 1999, 272 in 1996, and 365 in 1986." It's probably more complex than that, or he'd have hammered the point a lot more. I'd love to see a graph, for instance.

I'm sure it went something like this: 1)Give the number from this economically disastrous year, 2)find the other years with the highest number of IPO's and list them. 3)Use this ridiculously skewed comparison to prove your point

Take a look at the years since SOX was passed. IPOs have plummeted.

Re: Washington Is Killing Silicon Valley

#12

Post by tokenadult » Mon, Dec 22, 2008, 4:03 PM UTC

I always like international comparisons as a reality check on discussion of policy in the United States. Are countries without regulations like Sarbanes-Oxley enjoying a boom in entrepreneurial start-ups? Where?

Re: Washington Is Killing Silicon Valley

#13

Post by [deleted] » Mon, Dec 22, 2008, 4:05 PM UTC

ohhmaagawd wrote: post #4

tokenadult wrote: post #2

Voted up because the premise of the article is interesting. But I disagree with the statement that Sarbanes-Oxley is killing entrepreneurship, so I'd like to hear comments about that from the entrepreneurs here. I'm also not sure that it is a sign of failure that many start-ups sell themselves to an existing big company rather than doing an IPO. It seems to me (again I would like to hear from the entrepreneurs here a…

I know a CEO of an Internet company that planned on doing an IPO in 2008. Of course the economy tanked so it's not happening. He told me that SOX required the company to have auditing/traceability and controls for everything. This meant they quit using any software as a service applications, they shut down IM, they have to keep track of everything on every machine, banned a whole list of applications that would inter…

[deleted]

Re: Washington Is Killing Silicon Valley

#14

Post by indiejade » Mon, Dec 22, 2008, 4:11 PM UTC

It's actually the deregulation of Washington that's suffocated entrepreneurship. Because there were/are no checks and balances on the large monoliths' ability to kill or absorb rivals, a lot of little entities have suffered. Washington always says it wants to do what is best for "business," but it rarely distinguishes big business from small. . . it doesn't get the correlation between size and efficiency. The hum-hawing about corporate tax rate is pure whine. Let the little companies live long enough to make a profit upon which they have the ability to pay taxes, eh?

Re: Washington Is Killing Silicon Valley

#15

Post by ryanwaggoner » Mon, Dec 22, 2008, 4:14 PM UTC

wavesplash wrote: post #3

Pure subterfuge. A thinly veiled attempt to justify tax cuts and deregulation. AIG was killed by accounting? Try again. SOX hasn't killed the IPO, it's just made the hurdle higher and that's ok. IPOs are about consistent revenue generation - most of the firms of Web 1.0 didn't have it and didn't deserve to IPO. The WSJ has truly been compromised by Murdoch. NYTimes editorial on the death of the WSJ: http://tinyurl.co…

SOX hasn't killed the IPO, it's just made the hurdle higher and that's ok. IPOs are about consistent revenue generation - most of the firms of Web 1.0 didn't have it and didn't deserve to IPO.

Wrong, wrong, and wrong.

1. SOX has killed the IPO; IPOs have plummeted since SOX, due to the ridiculously draconian laws that make compliance expensive and time-consuming. Startups and small companies just can't afford the costs, closing one of the two viable exits for founders and investors.

2. "Raising the bar" for IPOs makes it sound like we're just going to get higher quality. The reality is that most companies can't afford to IPO, and even if they can, they're now hampered by greater costs and the distractions of compliance. If the bar needs to be raised, let the market raise it.

3. IPOs are not about consistent revenue generation: they're about raising capital. There's absolutely no reason why a growth business like Facebook that is not profitable shouldn't be able to IPO. If the market likes their odds of succeeding in the long run, their IPO will be a success. If not, it won't. In your model, someone apparently gets to decide who "deserves" to IPO. This kind of thing has never worked and almost always has the opposite effect of that desired.

Re: Washington Is Killing Silicon Valley

#16

Post by beastman82 » Mon, Dec 22, 2008, 4:14 PM UTC

ohhmaagawd wrote: post #11

beastman82 wrote: post #9

Earlier quoted context omitted.

I'm sure it went something like this: 1)Give the number from this economically disastrous year, 2)find the other years with the highest number of IPO's and list them. 3)Use this ridiculously skewed comparison to prove your point

Take a look at the years since SOX was passed. IPOs have plummeted.

I would love to, if WSJ provided the aforementioned graph.

Re: Washington Is Killing Silicon Valley

#17

Post by coliveira » Mon, Dec 22, 2008, 4:15 PM UTC

wavesplash wrote: post #3

Pure subterfuge. A thinly veiled attempt to justify tax cuts and deregulation. AIG was killed by accounting? Try again. SOX hasn't killed the IPO, it's just made the hurdle higher and that's ok. IPOs are about consistent revenue generation - most of the firms of Web 1.0 didn't have it and didn't deserve to IPO. The WSJ has truly been compromised by Murdoch. NYTimes editorial on the death of the WSJ: http://tinyurl.co…

I think it is appalling that entrepreneurs agree with SOX regulations. Nowadays, only companies making at least $500M annually can afford an IPO. Very few companies will ever be this big. This is destroying the incentive for capital investment.

Re: Washington Is Killing Silicon Valley

#18

Post by jerf » Mon, Dec 22, 2008, 4:18 PM UTC

beastman82 wrote: post #9

Herring wrote: post #5

Earlier quoted context omitted.

But clearly something has changed. FTA: "According to the National Venture Capital Association, in all of 2008 there have been just six companies that have gone public. Compare that with 269 IPOs in 1999, 272 in 1996, and 365 in 1986." It's probably more complex than that, or he'd have hammered the point a lot more. I'd love to see a graph, for instance.

I'm sure it went something like this: 1)Give the number from this economically disastrous year, 2)find the other years with the highest number of IPO's and list them. 3)Use this ridiculously skewed comparison to prove your point

2008 wasn't economically "disastrous" until the very end. Up until October, it wasn't too dissimilar from 2007.

http://lawprofessors.typepad.com/securities/2008/02/januarys... : "January [2008] was a slow month for IPOs, with only five that raised a total of $892 million. This compares with ten in January 2007 that raised a total of $2.25 billion." I quickly googled, and there's probably more to look at here, since either 5 of the 6 IPOs did it in January, or there's different counting methodology in action here. Still, it's down even in months that weren't bad. It's not just statistical gaming, even if that's in play. Asking what changed is still fair.

Re: Washington Is Killing Silicon Valley

#19

Post by happylancer » Mon, Dec 22, 2008, 4:19 PM UTC

i think most entrepreneurs in SV do not think of regulations when starting a company. for example, there aren't any tax laws to my knowledge that makes me go, "ah gotta take care of that before i can code."

of course, there will be an impact if a company wants to IPO, but that comes much later on. However, even in that case, it's more about revenue/income generation.

i'm interested in seeing what's going to be the liquidation route for startups now since the M&A market is quiet now.

Re: Washington Is Killing Silicon Valley

#20

Post by ryanwaggoner » Mon, Dec 22, 2008, 4:20 PM UTC

wavesplash wrote: post #3

Pure subterfuge. A thinly veiled attempt to justify tax cuts and deregulation. AIG was killed by accounting? Try again. SOX hasn't killed the IPO, it's just made the hurdle higher and that's ok. IPOs are about consistent revenue generation - most of the firms of Web 1.0 didn't have it and didn't deserve to IPO. The WSJ has truly been compromised by Murdoch. NYTimes editorial on the death of the WSJ: http://tinyurl.co…

Also, how is this subterfuge? The argument is that Washington is killing Silicon Valley's innovation machine through higher taxes and regulation. What did you think the article was about from the title?