For the first time in thirty years, Wall Street saw a quarter come and go with no companies going public. The second quarter of 2008 proved to be a disappointing one all around.
Adding on to residual distrust from the dotcom bust, venture capitalists and investment firms are reluctant to debut their startups to the public market during such a weak climate. Memories of Vonage’s embarrassing public offering two years ago don’t help the situation; venture capitalists feel going public during the current market’s mood would be anticlimactic.
The last time a quarter went by without an IPO, says the New York Times, was 1978. But worse than market fearfulness is market apathy. Further down that article is investor Paul Kedrosky’s comment: “There is nothing that the industry is producing that investors want….Wall Street doesn’t care. The Valley is operating in its own little world, and the capital markets don’t care about the things that are getting the Valley excited.”
True, YouTube and MySpace clones just aren’t all that thrilling. Investors are looking for the next YouTube-like phenomenon, not necessarily another YouTube. But really, aside from head-scratchers like Twitter or the RickRoll, there hasn’t been a mass Internet meme take hold in 2008 at all.
Everyone just sort of sits back and waits to see what happens between Microsoft and Yahoo and Carl Icahn, what happens between Google, the telcoms, and the FCC. It’s not just Wall Street that’s bored.
TechDirt’s Mike Masnick adds more to the theory about why venture capitalists are reluctant to take companies public: the Sarbanes-Oxley law we have courtesy of Enron. “Going public is a lot less appealing these days thanks to the expenses required under that law,” writes Masnick. “Rather than ‘cleaning up’ the market, it’s basically made going public a toxic process, so that everyone stays private and looks for acquisition opportunities.”
If the most exciting thing about the startup business these days is accounting regulations, then the industry is seeing hard times indeed.
