Non-Risky Business

Sarah - Enjoyed this article of yours in Business Week. You raise an interesting question on the reasons for the death of risk. I think your article touches on this line of reasoning, but I would argue underestimates the impact of Wall Street behaviors and the affects of Sarbanes-Oxley (Sox) on IPO's as an exit strategy for startups. That is, I think Sox and the short team thinking fostered/enforced by Wall Street puts a HUGE damper on desire of a management team to take a company public anymore. The reason this affects return (and therefore risk profile) is because taking an exit through an alternate path fully monetizes the company's value into cash immediately at acquisition rather than into a public equity that would have otherwise continued to grow and drive further incentive into the future. To be clear, I think the acquisition paths drive a value premium near term relative to value at IPO, but longer term the company tends to under perform it ideal potential - a potential that would have likely been delivered if everyone stayed invested in the business over the long term as equity holders post IPO.

Sarah - Enjoyed this article of yours in Business Week. You raise an interesting question on the reasons for the death of risk. I think your article touches on this line of reasoning, but I would argue underestimates the impact of Wall Street behaviors and the affects of Sarbanes-Oxley (Sox) on IPO's as an exit strategy for startups. That is, I think Sox and the short team thinking fostered/enforced by Wall Street puts a HUGE damper on desire of a management team to take a company public anymore. The reason this affects return (and therefore risk profile) is because taking an exit through an alternate path fully monetizes the company's value into cash immediately at acquisition rather than into a public equity that would have otherwise continued to grow and drive further incentive into the future. To be clear, I think the acquisition paths drive a value premium near term relative to value at IPO, but longer term the company tends to under perform it ideal potential - a potential that would have likely been delivered if everyone stayed invested in the business over the long term as equity holders post IPO.