[notahacker]

Trouble is that whilst the VC implosions are rare, so too are the >$1bn exits over that same period. And Twitter, down 20% in a market which has moved steadily in the opposite direction, is not exactly a poster child for holding prices...

From the 590 companies identified by CB Insights in December 2013 as being the "cream of the crop" of VC funded, IPO-ready firms, a total of just $33bn - less than one Uber - was made from actual exits (IPOs and M&A).[1] And 2014 was the best year for tech IPOs since 2000...

[1]OK, so its not a complete list, especially as the figure presumably excludes Alibaba and Whatsapp. And the 67 companies on the list that opted to exit in 2014 rather than hold out a little longer managed a mean exit valuation in the region of $0.5bn, which isn't peanuts. But it does put into perspective that this hyped IPO would be a very significant percentage of the annual revenues realised collectively for tech exits in a good year, which is probably a better metric than the number of unicorn valuations floating around.

[jedberg]

Tech IPO is a bad metric though because ever since the passage of Sarbanes-Oxley, no one in tech wants to go public, because the requirements for a public company are stupid, costly and time-consuming.

[bsder]

It's nice to bash SarbOx, but really that's not the problem.

The thing that is causing these absurd valuations is that Yagoopplezonsoft are choking out the pipeline too early for the big plays.

Most startups cash at less than $50 million, and LOTS of companies are sitting on huge cash reserves that can buy them there now. To the big companies, that's a big win if they pick up 10+ engineers and something possibly worth money. To the startup, that's also a huge win if you kept your headcount down. So, who's going to oppose the cashout?

After Yagoopplezonsoft vacuums up anything even remotely competitive in their space at the Series A point combined with the fact that VC's hate doing Series A funding because "Waaaaaaah. It's riiiisky."--the problems of getting your $5-10 million funding are well documented here--what's left?

So, the problem is that then number of companies that are willing to rack up a huge valuation is small. Once those companies actually get to the huge valuation, sure, there are a ton of people waiting for them throwing money at them.

The question you have to ask as a founder or employee single digit is, do I want to take the risk to go there?

If your founding bunch are remotely rational, the answer is "Not on your life, take the cash."

So, the only companies that would be willing to go to high valuations are high headcount, resource intensive companies that build real products--like Atheros. And VC's LOATHE those kinds of companies--so Atheros needed to get bought anyway.

The problem is of the VC's own making. Since they won't fund at Series A levels, they have so little to flog at Series C levels that the valuations go astronomical when one appears.

[foobarqux]

I suspect if you removed Sarbanes-Oxley the effect would be marginal: The primary reason to avoid going public is to be able to operate independently of the pressure from public investors and the media.

[toomuchtodo]

Honestly, I'm surprised Google and Apple haven't started massive stock buyback programs with the cash they're throwing up so they're no longer beholden to shareholders.