Valley IPOs Likely to Remain Few and Far Between

Not many companies based in Silicon Valley have gone public in recent years, and we shouldn’t expect the pattern to change. The trend is your friend, except when it isn’t.

In 2009, as reported by the Wall Street Journal, eight venture-capital-backed companies went public, according to research compiled by VentureSource. In 2008, only seven venture-backed companies reached the public markets.

Interestingly, though, only two of the companies that went public in 2009 were based in Silicon Valley. Those firms were online-reservations company OpenTable Inc. and Fortinet, the Internet-security specialist.

Talk percolates about the prospect of a few Valley-based IPOs materializing in 2010, but we’re more likely to see a trickle of activity, not a tsunami.

There are many reasons for the sustained torpor, and most of them have been discussed extensively here and elsewhere. Among the factors are the generally inhospitable macroeconomic conditions; the slow-growth maturity of the IT industry with which Silicon Valley is closely identified; the unappetizing prospects for big-money exits; the relative paucity of new venture-backed upstarts; and a structural realignment that is shifting money to emerging global markets and nascent industries outside the scope of the Valley’s traditional wheelhouse.

Does that mean the Valley is dead? No, it doesn’t. But it does mean that it, like the rest of the world, will have to adapt to changing circumstances and a new reality. As the late Warren Zevon intoned in a song with an expletive-laced title that I can’t cite in polite company, “The stuff (euphemism in effect) that used to work, won’t work now.”

Oh, Happy New Year!

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