I agree that there is a supply issue. I have been a CFO for 4 VC-backed companies (on my 5th now). Private is good. I dealt with SOX compliance while integrating my 3rd startup into its acquirer. What a nightmare!

The nightmare notwithstanding, I think we risk over analyzing this. It’s one quarter. The fundamentals of both early stage investing and late stage exiting are not changed. Despite the credit crunch, i-bank writedowns, recession threat, etc. It’s a timing issue and not a fundamental change.

Mark

I’ve done a few things since then (feel free to check out the About page on my blog) the most important being having two kids!

I just joined ATI a few weeks ago to help them with their Operations and Finance.

Next time you are in Austin, let me know and if you have time, I’d love to meet up.

With regards to this post, I agree with it being supply issue and entrepreneurs and directors alike not wanting to manage a public company. What would be interesting is to examine the social reasons behind that in addition to Sarbanes Oxley, etc.

Aruni

Welcome back.

I completely agree. It’s a supply problem not a demand problem. Obviously the buyside still has strong demand for successful pre-IPO companies — look at how many mutual funds and hedge funds are leading late stage private rounds. Two of Zillow’s VCs fall into this category — PAR Capital and Legg Mason.

Others who have argued that it’s a supply problem frequently point to SarBox or RegFD. And clearly the more onerous regulatory environment has complicated things and made it more challenging to run a public company. But there are other challenges also — the grind of hitting quarterly numbers under a microscope, and of course activist hedge funds which are increasingly targeting tech companies in ways that they never used to — witness YHOO and CNET.

Has anyone seen data on total VC$ raised per company before liquidity? I’m wondering whether it’s really true that web2.0 requires less capital. (That’s obviously the lore, but is it actually the case?) If so, then the IPO drought is less of a problem because employees and VCs can still earn healthy returns through M&A exits (which typically happen earlier and at lower prices).

I agree with Bryan’s comment — “it seems most web entrepreneurs’ dream today is to sell to Google for $100M, not IPO at $1B”. That’s spot on. But it presupposes a small amount raised in order for the $100M sale to be a successful exit.

except for one thing. as far as i can tell there is no shortage of talented pople who want to run or be officers or shareholders or principles or insiders of companies that are already public

so if your analysis is correct then why aren’t great talented people being recruited from existing public companies to get healthy private companies listed?

i’m not privy to enough info to be sure but at a distance i’m more with the infectious greed analysis — benchmark may be an exception but it stands to reason that the vast majority of vc fund portfolio companies are in no shape to be a sustainable public company — regularly growing their businesses and increasing earnings and margins etc.