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It's more than just overhead - going public forces you to think in terms of quarterly earnings reports. It's very hard for a tech company to thrive in that kin
by bkjelden 11y ago
It's more than just overhead - going public forces you to think in terms of quarterly earnings reports.
It's very hard for a tech company to thrive in that kind of environment - capital expenditures required to develop new products or enter new markets will often not be profitable for several years, and getting the public market to understand that is impossible.
- somic 11y agoFocus on quarterly numbers is a side effect, which is unfortunate. You go public not because you want to report quarterly. You go public because you want public funding and potentially better terms than private funding.
- api 11y agoSo public markets essentially make long-term thinking impossible?
- dragonwriter 11y agoWell, that's overly binary; it creates strong pressures to focus on short-term results rather than making long-term thinking impossible. (If enough of your stock is held by arms-length investors interested primarily in maximizing short-term returns, it could become impossible for management to manage based on long-term thinking where that conflicts with perceived near-term optimality -- since they will be replaced if they do -- but most IPOs don't actually produce that kind of distribution of stock.
- aetherson 11y agoCome on, capital expenditures to develop new products or enter new products have been a part of business since forever, and indeed the cost to develop a new product for a traditional company (say, a car company) is probably orders of magnitude higher than the cost to develop a new pure-software product. I mean, is there some kind of truth that it's harder for public companies to do ultra-long-range moonshot stuff? Maybe. But the idea that this is what's keeping Uber or AirBnB or Palantir from going public is ridiculous.