
Ask HN: Why have none of the ~940 YC companies ever gone public via IPO? - RockyMcNuts
It was interesting to notice in the discussion of the announcement of the VC fund that no YC company has ever gone public via an IPO.<p>After 10 years of success, and a lot of VC-backed companies that would be looking for eventual exits, that seemed like a surprising statistic.<p>Is the market for private funding that attractive, or the public market process that unattractive, or is it something special about the YC ecosystem that tends to not culminate in an IPO, or just the luck of the draw?
======
tptacek
The premise of this question is that each year YC operated produced identical
returns. No.

* The alumni network has gotten steadily more valuable

* The signaling value of being accepted into YC has increased _dramatically_

* YC's direct influence on investors has increased steadily

* The incentives to apply to YC have increased accordingly, setting up a virtuous cycle (you had to be a bit of an oddball to be in that first class)

* Each batch now funds many more companies than YC did in its entire first year

Meanwhile: it takes lots of years to get to a point where you're ready to file
S-1; since the nuclear winter in 2001, you need to be doing a huge amount of
revenue with a profitability that can be modeled in simple Excel spreadsheets
to do it.

So if you figure YC hit its stride 5 years ago, the year Stripe applied,
they're right on schedule.

Consider: Square was founded in 2009, with gold-plated credentials, has done
very well, and is only now filing for IPO.

~~~
danw3
Can you elaborate on Square's gold-plated credentials? Most of the news /
comments I've read about square post their IPO disclosure have been negative
(or at least skeptical) - largely to do with the increasing loss rate and the
state of the payments market.

~~~
7Figures2Commas
Square has prominent co-founders and raised over half a billion dollars from
prominent investors.

One way to look at Square is as a company that essentially bought its way into
the payments space. The question is whether its premium valuation is
warranted.

Some analysts point out reasons to be skeptical[1].

[1]
[http://www.streetinsider.com/Analyst+Comments/Cowens+Damning...](http://www.streetinsider.com/Analyst+Comments/Cowens+Damning+Analysis+of+Squares+IPO/10977891.html)

------
sixQuarks
Marc Andreessen answered this question:

The IPO is Dying

[http://www.vox.com/2014/6/26/5837638/the-ipo-is-dying-
marc-a...](http://www.vox.com/2014/6/26/5837638/the-ipo-is-dying-marc-
andreessen-explains-why)

Basically, high-tech growth gains have been privatized. Most of the upside is
made via venture capital now.

~~~
jbob2000
He made a couple of really important points in that interview though;

that the stock market is now dominated by short-sellers, who in their lust for
short term gains, will start rumors about your company and due to regulations,
you can only respond in certain ways.

that, in his words, you need "fleets of lawyers and accountants" to meet all
the regulations, something only a billion dollar plus company can afford.

that your company's stock will get "batted around like a chew toy", which will
really mess with a smaller company.

It sounds like the stock market is a buyer's game these days.

~~~
segmondy
bah, you could always beat those short-sellers by being profitable and
generating revenue.

------
ChuckMcM
I think there is a simple fallacy in your question, you wrote:

    
    
       > After 10 years of success, and a lot of VC-backed
       > companies that would be looking for eventual exits,
       > that seemed like a surprising statistic.
    

"IPO" is perhaps the smallest member of the set "eventual exits". Take the set
of all companies funded by VC money since 2005, take the number of IPOs by VC
funded companies since 2005, and you will get a very small number. (If the
folks at MatterMark want to pop in here, they have this probability in their
dataset).

------
BraveNewCurency
How could it not be luck of the draw? Do you understand how rare IPOs are?

> Why have none of the ~940 YC companies ever gone public via IPO?

I take issue with your implication: "YC has had no IPOs after funding ~1000
companies". That is a premature call, and (frankly) bending the truth. YC has
been taking on more startups per year recently. That skews the age of YC
companies to very young. If you assume that an IPO takes > 5-6 years, then
results for the _vast_ majority of YC companies aren't even in yet.

> After 10 years of success, and a lot of VC-backed companies that would be
> looking for eventual exits, that seemed like a surprising statistic.

Sure, YC may have fewer IPOs than normal VCs. That's because they are an
_early-stage_ investor, which has much higher risk. Thus, you would expect
fewer IPOs compared to a late-stage investor.

> is it something special about the YC ecosystem that tends to not culminate
> in an IPO,

Citation needed. What is the "expected" number of IPOs? Are there similar
__early-stage __VCs that have more IPOs?

It sounds like you are trying to dig for a problem that doesn't exist. It's
like complaining that your favorite baseball team hasn't had enough no-
hitters. Who cares, as long as they are winning!

~~~
RockyMcNuts
Didn't mean to imply a problem, or a criticism, or anything, really.

My prior would be that the public market has really changed in significance
for tech.

the ~900 is the wrong base rate, takes 7-10 years to become IPO eligible, but
there were ~100 companies through '08\. 0 IPOs after 10 years still seems like
a bit of an outlier for a large, unusually successful seed investor.

~~~
brudgers
Line by line refutation usually indicates argument for argument's sake. It is
not uncommon for people to go in search of things to take issue with.

------
tomcam
Sarbanes-Oxley. It's been a disaster for IPOs.
[http://www.vox.com/2014/6/26/5837638/the-ipo-is-dying-
marc-a...](http://www.vox.com/2014/6/26/5837638/the-ipo-is-dying-marc-
andreessen-explains-why)

------
Diamons
You're not going to get an answer. I think we all know why.

~~~
aerovistae
"We all" = ....?

I certainly don't, and would enjoy insight.

~~~
puredemo
Private VC investors take the gains rather than the public.

