Billion Dollar IPO's

I read an interesting post this morning over at The Conglomerate (HT Instapundit) in which the main point is that Sarbanes-Oxley is not a main problem in "improving the competitiveness of America's capital markets." What caught my eye was this:

Two key measures of this loss [in competitive edge] are (1) the decline in the US share of IPOs (in terms of value, a fall from 50% in 2000 to 5% in 2005 and in terms of numbers, a drop from 37% in 2000 to 10% in 2005) and (2) the increase in going private transactions.

It is the first part regarding the decline in IPO's that interests me.

A start-up company basically has three "end-game" paths it can take; it can look to become acquired, it can remain private or it can go IPO (Initial Public Offering). After the tech-bubble burst most companies either tread the first two paths or have been in sort of a holding pattern waiting for the market to return for IPO's. When read in context you understand that the 50% in 2000 was the bubble burst and the 5% in 2005 was from people being extra cautious. Now it looks like IPO's are back and that is very good news for the economy.

Most people are aware of the $1.6 billion acquisition of YouTube by Google but what seems to have flown under the radar is two recent billion dollar IPO's by two relatively small tech companies - Riverbed Technologies and ACME Packet. These two IPO's have sent mild shockwaves through the venture capital community and seem to signal a return of the IPO market. And that's good news for the economy and especially to people who work at start-up firms.

With more companies soon going the IPO route because of the success of Riverbed ($2 billion market cap) and ACME Packet ($1 billion market cap) - fewer companies will go private which means that the two main problems identified by the Committee on Capital Markets Regulation are in the process of righting themselves.