Comments on Why does everything suck?: The Real Reason IPOs And Mergers Are Down

It‘s a shame, but a statement like this only ends ...

2008-07-23T07:22:47.940-04:00

It‘s a shame, but a statement like this only ends up with a pat on your back. It is an ethic approach, proposal, but to whom? Who is blushing being impeached to be opportunistic? They laugh: Welcom to reality, they say. As we are in „Search of Excellence“ since ... 1984, the plea seems to me as a wrong approach; „As I said in ...“ did not help when said then; a teacher of mine once told me to stop trying to command troops that I do not have to my disposal.

(But: How to - ) Do the right thing!

It is our culture, and our culture ist the assembled mind set of those who were educated in a misunderstood and lasisser faire approach of individual freedom. It is the assembled mind set of those who just asked, and just got it. And it is the assembled mind set of those who have success, not aksing how or why. Even the american way of PC, once an ethical position like yours, Hank, is a bigotte pretext, nowadays.

And that is just the surface. There is no theory, no dream, no vision, no mental guidance, that a) is consistently adressing the complex situation today and therefor b) no one is naive enough to follow. We don‘t believe, whatsoever! We have one fact - ond 35 opinions, six of them totally antagonistic and by different experts. Each and every option is missing an inherent legitimateness.

A consistent picture of the world, and - consecutively - a reliable „rewarding“ for doing right (which has ended in catastophes of humainty so often), to my deepest regret, seems to be the only force to produce the added value of correcting a misguided society,

And only war is the alternative.

Ben,Thanks for the compliment about looking young....

2008-07-22T16:32:06.756-04:00

Ben,

Thanks for the compliment about looking young... born in '64 so whether that is young or not I guess is relative!

Regarding companies going public all the time with no revenues, i am not so familiar with bio tech where that may happen all the time but certainly no more in general tech. But in the last quarter there were *no* IPOs of venture backed companies in any genre, which has everyone freaked out. This post is primarily a response to that angst.

No offense, but companies go public all the time w...

2008-07-22T16:24:59.960-04:00

No offense, but companies go public all the time with zero revenue and often less than zero in net income. Stop thinking of the IPO as a liquidity event or an exit and start to think of it as a round of funding.

You look like a young man, Hank, so I wonder what your memory is of the late 1970's energy situation in the U.S..

Big cars, unstable middle east, etc, etc.

Nothing new under the sun. Nice post. -bh

First time visitor. Great post.

2008-07-22T15:52:35.923-04:00

First time visitor. Great post.

Hank,This is a good post and I'm glad you wrote it...

2008-07-22T15:30:05.079-04:00

Hank,

This is a good post and I'm glad you wrote it. The real reason we have relatively few IPOs is that we have relatively few companies being built to IPO. Nowadays, you need to have a $50-$70 million revenue stream (with decent margins) just to be in the IPO conversation. A lot of the concepts that are hot today in web 2.0 land either a) aren't addressing a market that will support companies that generate tens of millions of dollars or b) don't have a revenue model that has the potential to scale. So, until companies become more focused on revenue generation as opposed to scale and reach, we'll be in this situation. The real rub is that building a company with real revenues that grow over time is really hard work and it doesn't happen overnight. Look at Zappos. That's a real company with real revenue shipping real stuff. And it's hard work.

Thank you Hank! Hopefully this will get air outsi...

2008-07-22T12:54:03.423-04:00

Thank you Hank! Hopefully this will get air outside of your normal audience, because this is a message that needs to be heard.

Great post, I totally agree. The idea of the quick...

2008-07-22T11:36:42.128-04:00

Great post, I totally agree. The idea of the quick flip is a very seductive one, and I admit we fell prey to it even though we *knew* better (and talked frequently about it).

I think there's another facet to the bubble 1/2 that's important to touch on too. The unsustainable belief that all internet web services must be free. This psychology has fundamentally damaged the ability to try and provide real value to customers. This directly impacts the ability of most web companies, trying to make real money, from operating in normal ways.

If a company tries to charge for services there is a large negative backlash from customers. Then companies with large VC investments tend to apply "scorched earth" policies, providing what would normally be pay services for free (get the eyeballs!). The result is that companies trying to make money by providing value get strangled out of the market, and the idea that all services must be free is further reinforced. The VC backed company tries for hyper-growth at the expense of everything else. When the day of reckoning comes, if there is no flip or buy-out, they most likely have given away most or all of their value for free. If they decide to charge money, they are then exposed to the negative backlash and open the window for the next VC backed company to provide their services for free. It's a very unfortunate feedback loop that's not sustainable.

I corrected the statement that they were required ...

2008-07-22T11:35:03.844-04:00

I corrected the statement that they were required to IPO. They were required to file as a public company but of course they did not legally have to sell shares. Though it makes little sense to have to do all of the filing (the bad stuff) without the liquidity event (the good stuff).

Anonymous,The law says that when you have over a c...

2008-07-22T11:13:29.454-04:00

Anonymous,

The law says that when you have over a certain number of shareholders you are in essence a public company, and so must register as one. Because of the number of employees that they had to whom they had given shares they reached the limit. I forget right now what the number is but they hit it, or were about to hit it and so rather than just file as a public company, they decided to go ahead and do an IPO and sell shares.

Required by law to do so? What law would that be?...

2008-07-22T11:07:55.726-04:00

Required by law to do so? What law would that be?

Thanks for that. I think this is going to become ...

2008-07-22T11:01:09.780-04:00

Thanks for that. I think this is going to become more and more apparent as the economy continues to spiral downward. But at the same time, the depression that's coming will still see people wanting to risk a portion of the money they have to get back to feeling rich again. As long as there is the mere appearance of the ability to make a quick buck, we'll going to see VC's loaded with cash, even if they're investing in companies with no clear way to make money.

I think all of the bubbles that you mentioned (including real estate) weren't because people just 'forgot' about fundamentals, but because we have millions of baby boomers, all wanting to invest their retirement funds, and so money flooded these different spaces with logical consequences.

The end result is, in my opinion, not a mere correction back to normal, but a full depression ala the 30's. And it's coming fast.