An IPO-Free Tech Boom?

Fox Interactive's impending purchase of NewRoo for “something less than $10-million” got me thinking about the glaring absense of IPOs within the Web 2.0/technology sector. Why is this happening? I mean, NewsRoo hasn't even launched its news aggregation service yet, alone generate enough revenue to even consider an IPO yet Fox is willing to snap up the three-person start-up as part of News Corp.'s get big online fast strategy. My thesis about the total dearth of IPOs is there is an obsession with being acquired – and being acquired quickly – within the Web 2.0 world. With Microsoft, Google, Yahoo, eBay, News Corp., AOL, etc. flush with cash and hungry to expand their Web assets, the name of the game is building enough buzz and/or enough users to attract the attention of deal-hungry M&A teams. Another IPO issue is Sarbanes-Oxley, which has made it way too difficult for companies to consider going public unless they have a market capitalization of more than $500-million. Why do an IPO if you get saddled with compliance costs, quarterly results, financial transparency and the never-ending scrutiny of analysts and investors? Do you think Larry Page and Sergey Brin could have stayed private if it could have? Probably. Sarbanes-Oxley makes an IPO impossible for a Web start-up – unless they consider a listing on the London Stock Exchange's Alternative Investment Market, which is quickly supplanting Nasdaq as the market for fast-growing tech start-ups. Given this IPO-unfriendly landscape, you can expect M&A activity to continue to be the exit strategy of choice for entrepreneurs and VCs.
One more thought: Speaking of IPOs, what ever happened to Vonage's IPO? First it was raising $600-million; then $250-million, and now the IPO appears to have gone cold. Did Vonage miss its window of opportunity? Is a buy-out or an IPO at a bargain-basement price the only option left on the table?