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Facebook Ruined Everything for Silicon Valley

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Even the giants of the tech industry could not ignore the elephant in the room at this week’s F.ounders conference in Manhattan. Dubbed as “Davos for Geeks” the gathering’s speakers include Twitter’s Jack Dorsey, Eric Ly of LinkedIn (LNKD), and Reed Hastings of Netflix (NFLX). The Verge notes that many of the scheduled panelists have had something to say about of the changing world of young tech companies since the Facebook (FB) IPO debacle.

Anthony Noto, co-head of Goldman Sachs (GS) Global Telecommunications, Media and Technology, outlined the current situation perfectly. "I’m going to talk about a pre-Facebook IPO and a post-Facebook IPO world, because the markets have changed substantially," the Verge reported Noto saying. "What our team is hearing in the field is that it’s going to be a lot more difficult and lot more expensive for young companies to raise capital now."

Noto continued by saying the IPO window that was open to tech companies like Pandora (P), LinkedIn, Zynga (ZNGA), and Facebook has been closed until at least Labor Day.

It seems no one is able to forget Facebook’s botched opening day, especially investors. The buildup to Facebook initial public offering on May 18 at $38 was the most watched since Google (GOOG) went public on August 19, 2004. All the excitement ended in a huge hangover for all involved. On the first day of trading the stock was overvalued and endured numerous technical glitches, angering investors. This hazardous mix resulted in the multiple lawsuits soon filed against both Nasdaq and Facebook.

Now that the landscape has changed and obtaining an IPO has become more difficult, young tech companies are warming up to the idea of being purchased by more established companies. "Things have really picked up in terms of mergers and acquisitions. There is an immense amount of capital on the balance sheet of big tech companies and not a lot of value to keeping cash," Benchmark Capital’s Bill Gurley told the audience.

I definitely got caught up excitement of the Facebook IPO show. I considered buying individual Facebook stocks as gifts from I was more interested in gifting the stock as a financial education tool rather than a true investment but I’m still glad I stayed out of this mess.

I’m sure those who invested some serious money wish they had stayed out of it as well. Swiss bank UBS (UBS) lost as much as $350 million with their Facebook investment.  So can you really blame investors for being overly cautious these days?  

(See also: Has Facebook Found an Answer to Its Credit Problems?)
POSITION:  No positions in stocks mentioned.