When I caught up with Bill Hambrecht on Wednesday, he certainly wasn’t overflowing with sympathy for venture capitalists (the NVCA just launched a campaign to counter what it claims are structural obstacles that discourage young companies from seeking a listing on Wall Street, hurting VC returns.)
Asked why there weren’t more IPOs even before the financial crisis took hold, the veteran Silicon Valley financier had this to say: “I think what the [venture capitalists] really don’t like are the valuations.”
Hambrecht is himself the emblem of a vanished financial system in the Valley that the VCs still hanker after. He was the founder of Hambrecht & Quist, one of the group of small investment banks known as the “Four Horsemen” which once handled most of the tech industry’s IPOs. The banks were all swallowed by bigger fish (H&Q by Chase at the end of the 1990s), part of a shift in the Valley’s financial ecosystem that the VCs say has made it harder and more expensive to do an IPO.
They are now calling for a new group of boutique investment banks like Thomas Weisel Partners, Cowan and Jefferies to take up where H&Q and the others left off. One way they hope to do that: persuade the bigger banks to cut the little guys in on more of the IPO fees.
Yet Hambrecht is not wasting time complaining. His new venture, WR Hambrecht, has been pushing low-cost auctions as a way to match small growth companies with investors (and helped to persuade Google to take this route, much to Wall Street’s distaste.)
More investors will return to the IPO market once prices fall far enough, he told me. Of course, that will dampen IPO returns and, as Hambrecht says, cast an even harsher light on the VC industry’s recent poor investment performance.
