Start-Ups Hungry for Cash in IPO Drought

Private funding hunt under way in Silicon Valley
By Kevin Spak,  Newser Staff
Posted Jul 1, 2008 1:49 PM CDT
Startups from Silicon Valley garages like the one that spawned Hewlett-Packard Co. aren't going public as frequently as they once did.   (AP Photo/Paul Sakuma)
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(Newser) – Silicon Valley IPOs are suddenly an extremely rare beast, driven nearly to extinction by the sputtering economy, the Wall Street Journal reports. The first quarter has seen just five venture-backed offerings, compared to 31 last quarter. “The economics have been destroyed for small-cap IPOs,” says the co-founder of Revolution Partners, one of a glut of new investment banks stepping in to help.

With companies reluctant to go public, they’re forced to find more private funding, or accept acquisition offers. But buyers are scarce. “All of a sudden, you don't have pressure on a buyer to buy a company before they go public,” explains one lawyer specializing in IPOs. That also means delayed paydays for venture capitalists, who make money when their companies sell.