Washington Is Killing Silicon Valley • Hacker News Board

Re: Washington Is Killing Silicon Valley

#31

Post by ksvs » Mon, Dec 22, 2008, 5:02 PM UTC

indiejade wrote: post #26

indiejade wrote: post #14

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-haw…

Please don't downmod me without telling me why you've done so. Do you disagree with my points? Which ones? Are you pro-deregulation? If so, please provide some example about why you think big companies getting bigger by absorbing their competitors is good for entrepreneurship. Perhaps you have something against me personally? For that, I have no remedy, but to tweet for help: http://twitter.com/indiejade/status/10725…

"Resist complaining about being downmodded. It never does any good, and it makes boring reading."

http://ycombinator.com/newsguidelines.html

Re: Washington Is Killing Silicon Valley

#32

Post by snow » Mon, Dec 22, 2008, 5:06 PM UTC

Sarbanes Oxley does hurt the IPO market, but for good reasons. It serves to protect public investors from unscrupulous accounting. Expensing stock options has been part of the International accounting standards for a while now and makes sense. Otherwise, you've hidden a lot of your costs from your financial statements. Also, forcing companies to acknowledge their special purpose entities prevents companies from hiding their debts. The article's point about "made sure that corporate directors would never again have financial privacy" is wrong. Financial transparency is always desired. Investment banks have to worry about the cost of exposing their strategy when buying & selling, why should managers be different considering they have a lot of insider information in their heads.

SOX is bad for statups, but not for those reasons. The cost of compliance for smaller companies is too great in comparison to their income. The entire SOX shouldn't be brought down, it should be made more friendly for smaller corporations and an effort is already being made (see wikipedia under heading SOX 404 and smaller public companies)

Re: Washington Is Killing Silicon Valley

#33

Post by [deleted] » Mon, Dec 22, 2008, 5:12 PM UTC

Herring wrote: post #5

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…

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.

[deleted]

Re: Washington Is Killing Silicon Valley

#34

Post by tokenadult » Mon, Dec 22, 2008, 5:15 PM UTC

ksvs wrote: post #29

tokenadult wrote: post #12

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?

China

Are you planning to invest in a lot of Chinese start-ups?

Re: Washington Is Killing Silicon Valley

#35

Post by Darmani » Mon, Dec 22, 2008, 5:29 PM UTC

mooism2 wrote: post #23

In a single paragraph, this article claims that options in start-ups aren't worth anything, and then claims that without start-ups being able to hand out options they can't attract the people they need. Are options highly valuable or worthless? It can't have it both ways.

Options are worthless because companies can't go public in most cases and therefore options can't be sold. To attract top employees, startups need the ability to give options which can be sold and therefore aren't worthless.

Re: Washington Is Killing Silicon Valley

#36

Post by mseebach » Mon, Dec 22, 2008, 5:30 PM UTC

indiejade wrote: post #14

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-haw…

Would you mind sharing some examples? What promising start-ups have been killed or absorbed in an unfair manner, that used to be, or should obviously be, illegal?

The article supplies pre- and post-SOX IPO counts, and while that doesn't prove anything in itself, they do smell like fish.

Re: Washington Is Killing Silicon Valley

#37

Post by Darmani » Mon, Dec 22, 2008, 5:36 PM UTC

happylancer wrote: post #19

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 li…

Small burdens are never directly visible. No entrepreneur thinks "If taxes were 5% lower, I'd start a startup." Instead, they think "If I had twice as much savings, I'd start a startup" without stopping to realize they're saving an amount equivalent to 5% of their taxes.

In a similar vein, if my video game character gets -10% to speed (or +10%), I typically shrug it off as nothing, but it all too often is the difference between life and death.

It was actually a comment similar to this one a few weeks ago on HN that made me recognize this as a bias. I wonder if there's any literature on it.

Re: Washington Is Killing Silicon Valley

#38

Post by mtw » Mon, Dec 22, 2008, 5:52 PM UTC

does anyone know if it's possible to do an IPO in Canada (instead of the london stock exchange, as the article suggests)?

Re: Washington Is Killing Silicon Valley

#39

Post by gleb » Mon, Dec 22, 2008, 6:03 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…

It's an opinion piece. It's not even Journal's opinion, but the author's. Opinion pieces are basically rants and should read as such, whether or not they are correct at the core. This is easier with paper edition, where the context is much more obvious.

It's important to note the section when reading Journal's articles online, lest one treat an opinion of Mumbalumba's propaganda minister as WSJ front page news.

Re: Washington Is Killing Silicon Valley

#40

Post by russell » Mon, Dec 22, 2008, 6:04 PM UTC

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 worked for a company a couple of years ago that was planning to public in a year or two. The CEO told us that complying with SOX would cost $3 million for the IPO and over $1 million per year after that. That's a huge burden for a company with revenues of $35 million at the time. I have read that it is now $5 million for an IPO and that no company with revenues under $100 million can afford to be public. Malone says that there were 6 high tech IPOs in 2008 compared with 269 in 1999, similar numbers in earlier years.

The failure of IPOs isn't going to affect entrepreneurship, but it could well affect VC funding because it eliminates their primary exit strategy.

Malone does have a point about the FSAB. Treating options as an expense does make them less attractive to public companies, but it was an attempt to correct some egregious excesses. As usual, slap the big guys and hurt the little guys. Mark to market is an attempt to keep companies from hiding their investment losses in bookkeeping. The downside is that it makes their net worth much more volatile. AIG was a blivet in any case.

Cutting capital gains was good. Giving Reagan credit for the boom of the 90s is pure BS.

Cut the WSJ some slack. This was an op ed piece from an outsider. Malone used to be a San Jose Mercury News Reporter. He usually has something useful to say and he has the interests of the developer/entrepreneurial community at heart.