During an OnHollywood panel on exit strategies for private companies, mega-venture capitalist Tim Draper said that Sarbannes-Oxley is making it more difficult for startups to go public. "SOX has made it so a company can't go public with $20 million in revenue. SOX costs $3 milion a year. Entrepreneurs who break their back for five or seven years and get to $20 milion have three or four more years left. SOX ruined our business...we are adapting," he said. Draper, managing partner at Draper Fisher Jurvetson, had a recent home run in Skype, which was sold to eBay for $2.6 billion. He was also an investor in Baidu, the Chinese search engine that rose 354 percent the day it went public. His company has invested in over 400 companies over the years.
No one feels bad for Tim Draper. For entrepreneurs looking to hit a home run, the IPO is a distant dream. The Web 2.0 entrepreneurs today are mostly looking for a good double (baseball terms), hoping that GYM (Google, Yahoo, Microsoft) or some other big company scoops them up. Even companies with high valuations, like MySpace, take the path of least resistance and scrutiny.
The VC Tim Draper and the entrepreneur Jason Calacanis
Freshly minted AOL exec Jason Calacanis was also on the panel. He took the money (supposedly about $25 million) when he sold his Weblogs Inc. network to AOL four months ago. He had already risen and fallen during the boom and bust of Web 1.0 as the Silicon Alley magazine publisher and didn't have huge illusions about going public. He developed his network over the last 18 months, with angel investment from Mark Cuban, and claimed he wasn't fixated on the money. The Brooklyn-bred Calacanis called out his blue collar roots--his mother is a nurse, brother a firefighter, father a bartender--and could barely contain himself in explaining to Draper that real entrepreneurs don't need wads of VC money...