Thursday, January 26, 2006
Why do small firms need to go public?
For many small firms, one of the best ways to raise capital, and a lot of it quickly, is through the IPO process. Especially in the post tech-bubble era, venture capital (at least temporarily) dried up, leaving small firms only able to raise capital through the IPO or debt financing (bank loans) process. Alternatively, even with VC funding, VC usually want their small firms to go public, thereby allowing the VC an easy exit for their investment (ie, being able to sell their investment in the capital markets). Thus, without the ability to go public / remain public, small firms will remain just that - small firms. They'll lack the funding to expand, offer key employees equity compensation, or develop the next Google.
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