Friday, April 08, 2011

Lack of IPOs hurt the Venture Market

An interesting post from Dan Primack's excellent term sheet on the lack of an IPO market hurting VCs:
Publicly, VCs may have to support the SEC's newfound flexibility [in enabling companies to have privately traded shares]. They cannot be seen by entrepreneurs as trying to force unwilling companies into the public markets, or hindering the ability of those companies to raise private capital. Today's VCs are desperate to appear buddy-buddy with the entrepreneurial community, because they believe that generates preferable deal-flow. Remember, John Doerr wore a hoodie to appear Zuckerberg-y.

Privately, however, VCs should be concerned. The relative dearth of VC-backed IPOs was a very hot topic at this past week's National Venture Capital Association annual meeting, with many investors privately grumbling that the lack of a mega-hit (i.e., Facebook) was holding back other, less well-known portfolio companies. "We need a giant marker of validation for our companies," one longtime VC told me. "Kind of like a market comp for our industry, rather than for Facebook or Zynga's industry. We need [the public markets] to trust us again."
Back in the .com boom, when companies went public everyone would use their valuations to create whatever comp they wanted. The lack of big, public IPOs is probably hurting second and third tier VCs with their portfolio's loaded with Facebook, Zynga, and Twitter also rans.


Blogger greg said...

Peerhaps it's the "Winner take all" economy. Once the winner has taken it all, there would seem to be little left for anyone else.

Clearly, stagnating incomes of the rest of the economy should give those likely members of the top 1% of the economy venture capitalists pause, as they jingle the change in their pockets. Perhaps they should encourage their congressman to vote for more government spending, and higher taxes for the wealthy while they're at it, too.

9:41 PM  

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