I remember when there was still a time that tech IPOs were not that popular. In fact, tech startups were still up and coming and Google was a new phenomenon which had yet to catch on. How’s a search engine going to survive without ads on the main page? What’s gmail and why do I need an invite? Does my school have Facebook yet? All these questions, now seemingly a part of the distant past.
Many folks have recently observed the calamity that ensued after high profile tech IPOs including Groupon, Zynga and our very own Facebook. What you have probably seen is the tumultuous collapse of their respective stock prices from what was initially offered at the IPO. Rest assured the founders are still quite wealthy and won’t be receiving any tears of sympathy from me, but indeed it is indeed a reason for concern.
First and foremost, the question becomes where did all that value go? One of the underlying assumptions of the great financial system is that there are much more sophisticated individuals than the average layman that are able to assess the true ‘value’, risk and opportunities associated with various investment opportunities including IPOs. However, what we have seen here are either terrible calculations of value or gross misrepresentation of value in order to inflate the fees associated when companies IPO (investment bank advisory fees). Either way we look at the financial system like it’s a problem that doesn’t affect us. You better be sure it affects everyone and there are still people that are supporting their own wealth propositions without generating any value. Are we destroying value that has not yet even been created?
Secondly, why haven’t the very users and most avid supporters of these consumer related tech companies been permitted, till post IPO, to invest in the companies? Why were the average investors left on the sidelines? It’s because they don’t fall into an obscure basket of people defined arbitarily as ‘accredited investors’ which can be interpreted as ‘rich enough to lose money’. Now the average joe can invest in the hyped up IPO market for these startups and at least for the time being, lose money. Where did we get this so wrong?
Value and innovation is still out there and now the opportunity to invest in these entrepreneurs and businesses are at our fingertips through crowdfunding. We all need to come together to ensure that we create a sustainable system of investments which in turn will serve as the foundation for big future blockbusters. But let’s do it together and let’s create real value through these startups by impact crowdinvesting in sustainable and innovative businesses!
Above all, remember the techitans as they will serve as a reminder for the dos and do-nots of how we will grow into the future!