Web 2.0’s Long Road to IPOs
During the Web’s heyday, a profitable Internet company nearing $100 million in annual sales while luring a million new customers a month would have found itself on the IPO fast track. But that’s hardly the case for LinkedIn, a professional networking site that has cleared those hurdles and then some.
Instead, LinkedIn is hewing closely to the Web economy’s new motto on initial public offerings: Easy does it. Founded in 2003, LinkedIn may not sell shares until some time next year. Likewise, social networking site Facebook, worth $15 billion on paper, may not go public until 2010, a company board member says. People close to Facebook previously suggested an IPO could come as soon as 2009.
Meantime, fast-growing Web startup Slide, which makes popular add-on software for social networks, just banked a new round of investment capital to weather a recession that may hit before its planned IPO in 2009. “In the past, a lot of companies viewed it as their goal to go public,” says Facebook Chief Executive Mark Zuckerberg. “We’ll do it when it makes sense for us.”
Selling shares doesn’t make sense, the thinking goes, as the economy slows and Web companies struggle to wring profit from social network advertising. Add in costs of the 2002 Sarbanes-Oxley Act, which imposes disclosure requirements on publicly traded companies, and it becomes clear why some of the brightest stars in the Internet firmament are going public later rather than sooner.
“All three of these companies would have been public in the late ’90s,” says Peter Thiel, the former CEO of PayPal and an investor in Facebook, Slide, and LinkedIn. That none of them is public yet “is really a reflection of how radically things have shifted,” says Thiel, who’s also founder of hedge fund Clarium Capital Management and venture fund The Founders Fund.
Source: Businessweek
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