NY Tech Startups Would Rather Stay Private

Goldman-FacebookIn the wake of Facebook‘s recent multi-billion dollar valuation by Goldman Sachs and its accompanying $450 million investment, IPO’s have suddenly become passe. Long gone are the days where companies saw IPO’s as a rite of passage that earned them respectability in the public eye. Even entrepreneur’s of today’s emerging tech startups across the Big Apple hardly consider going public anymore. There are several reasons to this, observers note, including the decade long slump of tech stocks following the late 90s bubble and a contemporary attitude among founders who want to steer their own ship. At least this is how ExactTarget CEO Scott Dorsey sees it. According to him: “”We grew from 550 employees to 850 by the end of 2010 and did three acquisitions — why go public?”

The same applies to social games makers Zynga, best known for their mega-hit Farmville, whose $500 million in profit last year wasn’t enough to compel them down the IPO route. Perhaps the biggest argument in favor of shunning the IPO is startups have learned that mega-profits can be had without the bother of shareholders, Sarbanes-Oxley regulation, and the intense focus on quarterly figures over long term growth. It seems entrepreneurs who are battling it out in the tech trenches  prefer going their own way than expose themselves to the rigors of Wall Street.

There’s also the irrational paranoia of public markets to contend with. Charles River Ventures‘ George Zachary puts it this way: “Entrepreneurs are concerned that the public markets are still weak, and will continue to stay weak…I’ve heard from companies that if they receive an acquisition offer they’re more likely to take it than consider a public offering.”

Via: The Street