IPOs are so yesterday

At the Stewardship Asia Round Table in Singapore in June, we were discussing the implications of business disruption and I threw out a challenge:


Why did some participants continue to see the listed company as the natural vehicle for the aims of the founders of disruptive business?


The argument rumbled on through the day. It seemed that the majority of business leaders and owners were increasingly doubtful about the desirability of quoted company status for adventurous, inventive and ambitious companies. They could see problems; the habit of quarterly reporting, the obsession with today’s share price, the never absent possibility of takeover and the disinterest among too many opportunistic investors about the ability of the firm to make a difference beyond making money.


But what are the alternatives for these disruptive business founders? According to recent studies reported in The Economist (A Private Function September 29 p 68) these are increasingly abundant at least in the USA;

‘In the 1990s most young firms seeking $150m or more had to raise it by an initial private offering.

Now such sums are raised privately.’ There are large pools of private investors to turn to.


So much for supply of capital. Another study quoted in the same article observed that not only is less capital needed in a knowledge economy, but ‘private capital is more suited to ideas rich firms’.


Suppliers of capital, the article concludes, used to have the whip hand. Now it is users. And if those users have a purpose beyond profit, they will carefully select investors, and an ownership model, that makes investors like managers the servant of that purpose, and not its all too arbitrary master.