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A Stimulus Plan for Silicon Valley Is Needed

Posted by Bob Warfield on February 23, 2009

A stimulus plan for Silicon Valley is needed, despite what Sarah Lacy and Fred Wilson may think, but it isn’t in the form of the $20B author Thomas Friedman writes for the NY Times.  It’s much cheaper and simpler than that.  Change Sarbanes Oxley so small companies can afford to go public again.  That’s all it takes.  Simple, straightforward, and to the point.  I’ve already proposed this, so I won’t belabor it further here, but it is worth another mention.  Sarah and Fred think there is already too much money chasing too few deals, but that isn’t the problem.  The problem is liquidity is scarce because SOX has made it too hard to IPO deals.  Look at the exits for the VC’s and entrepreneurs.  Drying up capital is not going to change the problems of liquidity and lack of vibrant IPO markets.  If the VC’s want an industry that boils down to selling companies for $20M to $100M and forgetting about IPO’s, it isn’t going to be much of an innovation engine and most of the VC firms will die.  As Don Dodge points out, VC’s are chasing wealth, not job creation.  Wealth is an interesting proxy to job creation, but it isn’t the same thing.  Opening up the IPO markets again lets market forces drive job and wealth creation in tandem.

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