

Ask PG: Why not take YC public like Berkshire Hathaway? - citizenkeys

Why not take Y Combinator public like Warren Buffet's Berkshire Hathaway?  If you did, everybody could invest in the next big tech hits indirectly.  Also, by investing in YC everybody could enjoy the diversified risk versus investing in much more volatile individual companies.<p>Have you considered taking Y Combinator public?  If not, what are the compelling reasons to avoid that course of action?
======
chrisaycock
Every major "alternative investment manager" that has gone public in the past
few years is well below its IPO price:

    
    
      Blackstone (BX): -65%
      Fortress (FIG):  -90%
      Apollo (APO):    -35%
      Och-Ziff (OZM):  -75%
    

Think about it for a second. These are some of the most successful traders in
the world; they aren't going to undervalue their own company.

Likewise, the only reason a firm should go public is if (1) they need capital,
(2) they want a "currency" for acquisitions, or (3) they fell the firm is so
overvalued by the public that it makes sense to sell shares. The first
scenario is likely false for YC, the second wouldn't make sense either, and
the third is exactly what we have above.

Here's my response when a similar question to this one was asked last month:

<http://news.ycombinator.com/item?id=3893952>

------
dfc
I imagine that the regulatory overhead is enough of a reason not to go public.
But more importantly instead of asking "why not" I think the real question
"why go public".

Sure it would be nice if we could all invest in YC (read: make $$$ off pg) and
take some of the risk of YC's hands. But I don't think YC is frightened by the
risky/volatile environment. YC's business model and prowess seems to be
identifying which risky investments to make in a volatile market. Don't forget
less risk means lower returns. I have no idea what YC's bank statements look
like but I doubt that lack of capital is the most pressing business challenge.

Has PG ever compared BRK to YC? BRK seems to invest in companies at a
completely different stage than YC.

------
frisco
> _"Question from audience: What keeps you guys up at night? What do you fear
> most?_

> _Paul Graham: I fear that something will come along that causes me
> personally to have to do a lot more work._

[[http://blakemasters.tumblr.com/post/21869934240/peter-
thiels...](http://blakemasters.tumblr.com/post/21869934240/peter-thiels-
cs183-startup-class-7-notes-essay)]

This aside, in the vast, vast majority of cases there aren't any benefits for
the _company_ for being public in the US any more; just tons more work and
requirements. YC as it exists today would be impossible were it a public
company.

------
arockwell
What is the advantage of YC going public? I doubt they will have any trouble
raising more money if they need it.

~~~
citricsquid
indeed, the focus of this post seems to be "why _not_?" when it should be
"why?"

------
jacquesm
related, about a month ago: <http://news.ycombinator.com/item?id=3893783>

~~~
jrockway
Thanks for the link. I think pg's first response is exactly the answer to this
question.

~~~
citizenkeys
pg's response doesn't exactly answer the question. crowdfunding start-ups
would involve all investors dealing with all the start-ups. by investing in
YC, YC would manage the portfolio of companies on behalf of shareholders.

the reason for YC to take investors would be to inject new capital that could
be invested in more start-ups. imagine semi-annual YC batches of 1000 or more
new companies. or seed rounds of 1 million or more per start-up, which is
actually becoming increasingly common already.

------
pbreit
Since being public is obscenely well-known to be a pain in the neck (even
before the Facebook debacle), the OP is obliged to make a much stronger case
for "Why?".

------
theorique
YC is essentially a small, early-stage VC firm, focused on the tech and
software market where very early seed investments can make a tangible
difference.

I can't think of a single public company that operates according to that
model. That doesn't mean that it's wrong, just that most early stage VC firms
are small partnerships which gain no advantages through raising capital in the
public markets.

(In fact, the greater scrutiny and publicity that publicly traded companies
face is more likely to be a serious downside that VC and PE firms want to
avoid.)

------
ew
Why would PG and YC ever let us mess up a good thing? There's zero incentive
for him to let us participate in his success.

------
saeidm
The incentive to go public is for companies who could use additional funding
to grow. VC isn't short cash.

------
lukeskurman
Does Y Combinator ever invest in the follow-on rounds of companies that have
gone through its program? If not, why not? It would seem a logical easy place
to own an even greater share of their most promising companies...

~~~
itsprofitbaron
One of the reasons that Y Combinator do not do follow on rounds because, it
looks bad if they don't invest in every single one of their investment in the
next round.

I'm sure there are probably others but ^ is alone is a very good reason not to
participate in follow on rounds.

However, some of the YC partners are also angels and have made some
investments in some of the YC companies in follow on rounds e.g.
Priceonomics[1] & Crowdtilt[2]

There are others YC companies which the partners have also made investments
in, I'm just highlighting two of them.

[1] <http://techcrunch.com/2012/05/04/priceonomics-seed-round/>

[2] [http://techcrunch.com/2012/05/17/kickstarter-for-groups-
and-...](http://techcrunch.com/2012/05/17/kickstarter-for-groups-and-events-
yc-alum-crowdtilt-picks-up-2-1m-from-sv-angel-yc-partners-and-more/)

------
hagestev
Its pretty simple. Because they don't need to. They're doing incredibly well
without tons of scrutiny for every decision that they make. The question
should be phrased the other way around: why would YC go public?

------
adatta02
GSV Capital is doing something similar - <http://gsvcap.com/about/>

NASDAQ:GSVC

------
mkramlich
I like how this question comes in the wake of the recent Facebook IPO
shenanigans.

------
dfc
What publicly traded companies compete in the same space as YC?

~~~
drumdance
Internet Capital Group went public during the last bubble when B2B and
incubators were all the rage.

<http://en.wikipedia.org/wiki/Internet_Capital_Group>

As an investor I would stay away from VC funds that went public. I'd want
partners to have a lot of their personal capital tied up in the fund, not
cashing out in an IPO.

------
anon808
once YC is public, mutual funds could buy it and then we could invest in those
mutual funds to really diversify our exposure.

~~~
mkramlich
Taking this to the logical extreme: in the "YC goes public" scenario, go ahead
and just invest in a truly market-wide index fund. The problem with this
direction is that as you diversify away your exposure to downside, you also
diversify away your exposure to upside. Because you get a smaller slice of
YC's returns/growth and a larger slice of a bunch of other, presumably worse
performing, businesses.

------
tubbo
The only reason anybody cares about Berkshire Hathaway is because it's Warren
Buffet's company and that guy is a fucking genius. You can learn practically
everything you need to know about the stock market simply by watching him and
his company work.

