Academic

"There is no venture industry if there is no I.P.O. market"

By Gordon Smith, Christine, Hurt, Vic Fleischer, Fred Tung, Lisa Fairfax, David Zaring

That's Paul Kedrosky talking about this news from the National Venture Capital Association: "In the second quarter of this year not a single company backed by venture capitalists has gone public. It is the first time that has happened since 1978."

Fred Wilson takes a different view:

VCs themselves, at least this VC, have learned that a sure payday via a M&A transaction is often a better way to generate returns than the hope of a big public market payday....

Sarbanes-Oxley and other post bubble, post Enron regulations have certainly made it harder to be a public company here in the US. I know every time I sign a 10K or 10Q, my hand shakes a little. Honestly, it takes a very big opportunity to make me want to be a significant shareholder or a director of a public company. The risks and hassles are just so big....

We've had three exits to date in our first USV fund and none have been IPOs. I think we can generate the returns we need to produce to satisfy our investors without a single public offering in our fund.

Despite this sentiment, Fred notes that venture capital would be different without IPOs: "It would be smaller, with fewer funds, and smaller fund sizes. And it would struggle with big bets like biotech and cleantech, and the kind of hardware oriented IT investments that generated such great returns in the 90s." So he concludes with a called for reduced regulation: "We need to let markets work and not worry so much that some people will lose money on their investments."

Full post as published by Conglomerate on June 30, 2008 (boomark / email).