I was employed by cisco systems when they went public in 1990. I’m now looking at the difference between last week’s Facebook IPO and cisco’s IPO. Cisco was a very young company when it went public and it did so to achieve three goals: Provide its founders with liquidity, provide its VCs with money, and allow the company to build a store of capital for future investments. Â Cisco was unusual in that it was ALWAYS cash positive – Sandy Lerner and Len Bosack ran the company as a cash box operation (they funded the company from incoming cash). They allowed Venture Capital to invest primarily for their own liquidity. What happened after the IPO was remarkable: LOTS of shareholder value was returned to the many, many common people who had invested in cisco.
Facebook, by contrast, represents the enrichment of VCs and company employees; they went public after the valuation reached the stratosphere.Â The chance of the average person making money owning Facebook stock is probably near nil.Â Is this the future? Probably so. Google started it with a massive IPO.Â It seems like a loss for the public to have Venture Capitalists and employees take all the value of a technology company and only go public when they have a bloated valuation.
I’ll look forward to when new startups can reduce the influence of VCs and allow the market to invest in new ideas in their formative stages.