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June 17, 2009

Is the dearth of IPO's an "absolute crisis"?

...Trevor Loy, a NVCA board member called the lack of IPOs an "absolute crisis," when we sat down to talk with him. Loy, who's also a managing partner at Flywheel Ventures...


Here's my take on this working as a scientist/engineer involved with what COULD have been offered a year ago as a small cap IPO that might have been worth maybe a $50M stock sale. What we're doing is "very disruptive" technology, with a worldwide market in the hundreds of billions of dollars based on the installed base we'll be displacing and new applications.

We've talked with a number of VC types and they all wanted an excessive cut of the pie. We're not going to give up 10% for $100K on a business worth billions. We will continue working, essentially self financed. We've manged to somehow make deals for partnerships, that costing us $0.00, that resulted in us being donated lab space, equipment, and outside technical services we don't have the equipment on hand to do ourselves.

If we had gone IPO last year, there would have been instant pressure to bring last year's technology to market quickly. Last year we knew a lot less than we do now, and doing that would have involved investing in probably $100M worth of industrial lasers to accomplish any sort of meaningful volumes, and buying wafer format raw materials that were (and remain to this day) hyper expensive. We would have been making Model-T's with Ferrari price tags -- pretty much where Cree and the whole LED lighting industry is right now.

By hunkering down and avoiding the IPO trap we now believe we have a process that allows for extremely rapid mass production using raw materials that are just slightly above say...the cost of dirt.

I don't believe we're the only scientific development group out there that has realized that there is little value to doing an IPO when your technology and knowledge is moving very rapidly, and you're managing to get by, and produce stunning new results on a weekly/monthly basis, pretty much sucking on air.

We may yet someday do an IPO, but quite literally, every day we can hold out would increase the value of that IPO by millions of dollars. We're discovering new shit so fast its hard to keep up on writing the patents for it.

Now, everyone involved with this on a daily basis is over 40 years old too. We don't have to 20-something 1990's dot-com mentality where every crackpot idea wanted to do an IPO and get rich quick. We're more patient. We not so eager to jump at some VC's scraps and give away the keys to the kingdom so we can go buy a new BMW or Mercedes.

Frankly, if we did an IPO in the future and generated say $100M, we wouldn't know what to do with it all.

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posted by Purp at 02:30 PM

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