
As IPOs Pick Up, Big Startups Hold Out - prostoalex
https://www.wsj.com/articles/as-ipos-pick-up-big-startups-hold-out-1494154807
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abakker
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/matt...](https://www.bloomberg.com/view/contributors/ARbTQlRLRjE/matthew-
s-levine) \- 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
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
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
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.

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justinzollars
I'll probably get some flack for saying this on this community, but after
working for a unicorn, I understand this:

"Reflecting broader concerns about whether they can match the rich valuations
offered by private investors."

It feels like a Ponzi scheme. I haven't called the end yet, but I finally feel
like the end is near.

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redm
Two primary reasons companies go public 1) cash out and 2) raise capital. I
don't think Air BNB or Uber need money currently and I suspect they don't want
the additional scrutiny/headaches an IPO brings to their businesses yet.

~~~
dsimms
Maybe they don't want the scrutiny, sure, but do seem to need funds.

Airbnb last raised money through equity in March:

[https://www.crunchbase.com/organization/airbnb/funding-
round...](https://www.crunchbase.com/organization/airbnb/funding-rounds)

Uber last raised money through equity last June

[https://www.crunchbase.com/organization/uber/funding-
rounds](https://www.crunchbase.com/organization/uber/funding-rounds)

(but has taken on other financing since then).

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EternalData
It's going to be interesting to see how long private markets can maintain
irrational bubbles hidden away from transparency.

I think a lot of people are "rich on paper" and scared to know exactly what
that means.

As a corollary to this, I've recently seen private secondary markets boom
quite rapidly. There's probably a huge opportunity there.

~~~
mathattack
Private Secondary markets are a huge opportunity.

I'm not sure the lack of transparency is a big issue, except for employees.
The VCs generally know what's going on, if not the mutual funds that get in
late.

What generally corrects markets quicker is the ability to short. When you
can't short (or make a bet that something will go down) then it's only the
optimists who are setting the price.

~~~
EternalData
Yeah, very fair point on this. Are private secondary markets just by default
eternal bull markets? What's the price correction mechanism? Devaluation due
to massive supply/demand imbalances?

Interesting space to get involved in, for sure.

~~~
mathattack
If the market is small enough and there isn't leverage, you can have long term
price dislocations. (Example: penny stocks) If the purchases are funded by
borrowing, then eventually the debt payment come due and force corrections.

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rcarrigan87
With all the bad PR Uber has gotten lately it makes sense that they may wait
longer but I'm surprised AirBnB hasn't already gone public.

~~~
bernardlunn
I am a big AirBnB fan, but I think that Uber is imploding. If Uber imploded
while AirBnB was public it would drag AirBnB down as well.

~~~
lhnz
Do you think the whole of the tech industries success is linked to Ubers?

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jressey
There is a lot of skepticism in the 'sharing economy' and Uber is the de facto
representative of the model. Any negativity they suffer will likely affect
other companies that use the model.

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hkmurakami
I'm pretty impressed at the way cloudera has handled their "downround IPO" by
telling their half truth half BS "Intel strategic investment shouldn't count"
story.

The market seems to be alright with it.

Pretty bad for latecomer employees though =\

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khoury
[https://airbnb.myshopify.com/products/belo-
keyring](https://airbnb.myshopify.com/products/belo-keyring)

