Alibaba is in the news – running an IPO aimed at raising $21 billion. Oculus, the once darling of crowd funding fans, sold to Facebook for $2 billion after raising $2.4 million on Kickstarter. The Alibaba IPO won’t fund Alibaba’s growth or create employment, and the Oculus deal snuffed out an independent company and does nothing for its early supporters.
Let’s start with first principles – what is the purpose of the capital market? Cynically, and with some reason, we can say it exists to enrich a very small segment of our society, but a better answer is the capital market exists to fund the nation’s enterprises and generate prosperity. Clearly this is not what they are doing. To our mind, prosperity comes from distributed wealth, and today’s market serves to concentrate wealth.
I have a background in financial markets and tech startups. I’d like to be able to fund my current company in the public market, and I’d like small investors to have the chance to buy our stock. We would have a better chance to pursue our strategy without a dominant investor, and if we succeed as we intend, small investors would be able to come along with us. The market I have in mind financed the creation and growth of the tech sector from the 1970s through the late 90′s. That market no longer exists, IPOs are now reserved for exits, not beginnings, and crowd funding is no substitute.