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.
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.
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.
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.
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.