The Wall Street Journal is running an opinion piece today stating that rules in Washington are choking off the supply of new entrepreneurial start-ups. The article "Washington is Killing Silicon Valley" by Michael Malone, claims the Sarbanes-Oxley, mark-to-market accounting rules, and new rules about expensing stock options are causing the whole entrepeneurial system to dry up. He cites as evidence that "According to the National Venture Capital Association, in all of 2008 there have been just six companies that have gone public."
From my experience in Seattle, there is currently no shortage of vibrant new start-ups. With Teach Street, Healionics, Urban Spoon, Picnik, Buddy TV, and Shelfari, as just a few notable examples, Seattle is currently awash in start-up activity. Rather my guess is that the primary reason we have seen so few IPO's in 2008 has a lot more to do with the state of the stock market than the general decline of entrepreneurship in the countries. These young companies are simply making the entirely rational conclusion that they can obtain higher value by selling to the big players like Microsoft, Google, and Amazon, rather than try to go for an IPO. My guess is when we see the market back on an upswing and investors are looking for the next big thing, we are going to see a lot more of these start-ups playing the IPO game again.