With the money flowing freely in Silicon Valley, there’s been little incentive for startups to face the public markets, says Bill Maris, CEO and president of Google Ventures.
Corporations are raising cash like a startup, absorbing mountains of money from venture capitalists rather than facing a fickle public market. As a result, tech IPOs in 2015 are markedly down from previous years.
“It swung from 1999/2000, which I lived through as a startup internet CEO, where companies were going public when they weren’t companies and just startups to now where they are legitimate corporations and just waiting as long as possible, avoiding going public at all costs,” Maris says.
Unlike previous years, the venture firm declined to disclose in its recap of 2015 how many exits the company has had in the past year, but the number is lower, Maris admits.
“I think we had fewer absolute exits, and that’s not because we had more companies fail necessarily, it’s because companies are waiting to go public in ways that I don’t quite understand sometimes,” he said.
It’s in large part due to the funding environment in Silicon Valley. For the past few years, it’s been easy to raise money in the private market so there’s no incentive to go public. In the last quarter, though, the market has tightened, according to Maris.
“You’ll see exits accelerate when the funding environment gets more difficult. We’re starting to see that happen, and it wouldn’t surprise me if interest rates go up, if investors don’t want to deploy as much money or are more picky, and companies that can’t raise money will shut down, be acquired, or go public,” he said. “As long as money is flowing freely, you’re not going to see a ton of exits.”
Maris refused to name names of which companies should make the move to go public — Google Ventures is an investor in Uber, so he may be waiting a while to get a return on that one. But Maris did suggest that the IPOs of Box and Square are examples of good results of when tech companies go public.
“There are certain companies that would benefit from the rigour and the oversight and the legitimacy that comes from being a public company, and they will find out that it’s better for them,” Maris said.
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