AIM fever continues unabated, with US and other companies preparing to float on London's lightly regulated stock market. First it was the escape from onerous regulation in the form of Sarbanes-Oxley, now it seems to as much about the higher valulations achievable on European markets.
Every week I talk to another small company that is looking to list on AIM or Alternext in lieu of seeking venture financing. In some cases this is genuine competition to private equity investors like us. In others it feels more like taking advantage of a less discriminating market for tech company securities.
Alarm:clock Euro posted a salutary quote a few days ago from Danny Rimer of Index Ventures in a Business 2.0 article on the topic. I don't usually republish stuff from other blogs, but this is a good point:
There is a chance it could all go terribly wrong. Let's not forget Pets.com and other problem children of the dot-com bubble, which the Nasdaq welcomed with open arms not so long ago. Investors will need to proceed with caution to make sure venture capitalists don't start dumping ailing startups on these "light touch" markets, with bankers and entrepreneurs playing along.
"You need to get these three parties to behave well," says Rimer, the London-based venture capitalist. "It may be a tall order, but if it's accomplished we could see something like the AIM becoming what the Nasdaq was back in the mid-'90s." In other words - a market for promising companies where investors actually made money, before the bubble started inflating.
We're all in favour of more liquidity options for European growth companies, but let's make sure we don't burn the very institutional investors we want to have buy into our companies when they're ready for prime-time.