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I am a big fan of Matt Levine's recurring theme: "Private Markets are the new Public Markets" - https://www.bloomberg.com/view/contributors/ARbTQlRLRjE/matthew-

I am a big fan of Matt Levine's recurring theme: "Private Markets are the new Public Markets" - https://www.bloomberg.com/view/contributors/ARbTQlRLRjE/matthew-s-levine https://www.bloomberg.com/view/contributors/ARbTQlRLRjE/matt... - many of his "people are worried about Unicorns" sections address this. The core of his argument is that public markets come with regulations, which discourage IPOs, and that as long as investors are tolerant of companies staying private, they will. So, in this market (generally up over the last few years), people aren't worried about cashing out, so they let private companies stay private, and reap more of the theoretical rewards.

ithinkinstereo 9y ago
At some point these investors need to turn their theoretical rewards into real ones. At smaller valuations they could pass the bag onto the bigger, public, tech companies. The only path forward now is via the public markets.
- patmcguire 9y ago
  Do they? I have less than zero idea of what getting LP funding is like, but it may work out better for them. As long the unicorn hasn't IPO'd yet, it's not a failure. Once it's IPO'd it is what it is, and if it's bad it's bad. Bad returns + high potential may be an easier sell to a pension fund or family office than what the actual numbers will be.
  - ithinkinstereo 9y ago
    The problem with that approach is that VC valuations are almost entirely predicated upon hype and future performance, way more so than the public markets. So more VC funding = higher valuations that the Unicorn then needs to meet in the public markets. If they can't match private valuations, alot of people get wiped out; first and foremost the employees and founders. So it's like a game of brinkmanship until something breaks.
- beamatronic 9y ago
  >> The only path forward now is via the public markets. Is that because profitability is not an option?
- wil421 9y ago
  Couldn't a private company just pay its investors excess profit? Let's just say Google never went public and they have the profits they do today. Couldn't they share this with investors? Disclaimer: I'm not very knowledgeable about how businesses function in these areas.

ithinkinstereo 9y ago

At some point these investors need to turn their theoretical rewards into real ones. At smaller valuations they could pass the bag onto the bigger, public, tech companies. The only path forward now is via the public markets.

patmcguire 9y ago
Do they? I have less than zero idea of what getting LP funding is like, but it may work out better for them. As long the unicorn hasn't IPO'd yet, it's not a failure. Once it's IPO'd it is what it is, and if it's bad it's bad. Bad returns + high potential may be an easier sell to a pension fund or family office than what the actual numbers will be.
- ithinkinstereo 9y ago
  The problem with that approach is that VC valuations are almost entirely predicated upon hype and future performance, way more so than the public markets. So more VC funding = higher valuations that the Unicorn then needs to meet in the public markets. If they can't match private valuations, alot of people get wiped out; first and foremost the employees and founders. So it's like a game of brinkmanship until something breaks.
beamatronic 9y ago
>> The only path forward now is via the public markets. Is that because profitability is not an option?
wil421 9y ago
Couldn't a private company just pay its investors excess profit? Let's just say Google never went public and they have the profits they do today. Couldn't they share this with investors? Disclaimer: I'm not very knowledgeable about how businesses function in these areas.