See this post by venture capitalist Fred Wilson, guest bloggging on Business Insider (nee Silicon Alley Insider) and re-posted on his own well regarded A VC blog, entitled The End of the IPO Drought is Coming.
The five key points of the argument are:
- VCs have been in the penalty box for the dot-com era for nearly 10 years. It may well be time to let them out.
- There are a lot of solid companies in the IPO pipeline
- Many of those solid companies have annuity business models
- When investors want to buy small company stocks again they are going to want to buy simple, one-product businesses they understand that drive growth and aren’t too fancy (i.e., no financial tricks). That’s what VC creates.
- Sarbanes-Oxley is now well sufficiently well understood so that compliance costs are dropping.
I agree with the first 4 points. On the last one, I’m not yet convinced. Certainly, experience has made things better, but my friends who run small public companies still describe SOX as a 2-4% tax on revenues, which is doubly difficult because these companies often have single-digit margins to begin with, and ergo end up unprofitable after SOX costs.