IPO Madness

Many in the venture industry have lamented that there hasn’t been a good IPO market in years. And for the most part they are right. But in our Flatiron partners portfolio (where the average age of our investments is 6-7 years), we’ve had three IPOs in the past couple years and we have one or two more scheduled this year. So there has been and continues to be a market for profitable companies with good growth prospects.

But as Adam Lashinsky correctly points out in this Fortune article, we are now witnessing the kind of offerings that will ultimately kill the resurgent IPO market.  Unprofitable companies that have huge capital requirements and uncertain tracks to profitability (ie story stocks) will always come public in a hot market, but often make for terrible investments.

I am not suggesting we regulate the IPO market.  Letting the market work is fine with me. In this case, I suspect it will work just fine and the investors who get burnt will stop buying for a while meaning less liquidity for the profitable proven business models that follow them.