I’m starting to wonder if startup founders and VCs are even really considering the IPO market as an exit anymore. This is much more of a brain storming post than anything, but I don’t really know if most companies are even positioning themselves for an IPO once they reach a certain size. Usually (and I am basing this off of my experience as a baby investment banker during the dot.com boom) once companies reach the critical size for an IPO they staff up in certain elements: IR and finance/accounting, mainly. I don’t see boards allowing these sorts of expenses right now, even for companies with real scale. I guess these are more expensive things to do these days, given the increased regulatory hurdles required to be a public company, but still I’m not sure boards will allow these sorts of expenses until there is a more open IPO window.
Obviously the markets aren’t great for IPOs right now. My theory is that the investors who loved the small-cap growth tech stocks have left the building… plus the volatility makes it very hard to get an IPO priced. I have no hard evidence to back this up, but I put the blame on those two facts impressions.
Rosetta Stone, the most recent VC-backed tech IPO, seems to be doing pretty well. This is a real business, with scale and profits. I know that VC portfolios have other companies with similar profiles. Maybe the risk of going public is too great right now. If you’ve got a cash flow positive business that is doing fine as a private company then why risk an IPO right now? (Obviously I don’t own any Rosetta Stone shares or know anything about the company other than what I can see from their public filings.)
