And basically what had happened was that post IPO Groupon's accounting irregularities, which were earlier hidden, became public and the company fell from grace.
Same thing happened recently with WeWork and there have been numerous other companies.
Basically, while private, startups are able to engage in practices that don't survive under public scrutiny. No wonder startups, especially ones on shaky foundation, are remaining private longer.
It was very odd. I got the sense that he got frustrated with all his business ideas failing, ran with the one business idea that actually could succeed (which was basically a pyramid scheme dressed up as marketing), but never really got comfortable in his own head with running a pyramid scheme, so all sorts of psychological defense mechanisms come out when he talks about it. His other actions (like introducing Progressive Equity , and his subsequent startups Detour and Descript having legit if less successful business models) also suggest this.
Anyone who offers a deal like that can't be very ethical.
It's not much of a learning experience if all you get is rewards. Even if he's bitter that the rewards weren't as much as he wanted.
Do you really think these companies are just following what shareholders are telling them?
The boundaries of human nature in regards to capitalism are very different across societies/ nations.
An example of this is the difference between the US and Europe. US capitalism is much more unrestrained, ruthless, and uncaring compare to Europe.
In the US the business is treated in higher regard and respect than the people compared to Europe. Of course Europe does this to some extent but it is more limited than the US.
The US would do well to take a leaf out of Europe's book.
I don't understand what this means. What "people" are you referring to? What is the context for "higher regard"?
Good affordable healthcare is standard many European countries. In the US it depends on your employer.
Minimum holiday entitlement in Europe is far more generous that in the US where again it is down to the business.
Maternity and paternity leave is better in Europe. In the US it depends on the business and your position in the comapny whether you get reasonable leave.
Unemployment benefits are more humane in many European countries. I have heard that in the US they will contact your last employer and whether you get unemployment benefits depends on what the employer says. While there are some limits in this regard in Europe your Ex employer's word doesn't hold as much weight.
I'm sure there are more examples I could come up with as well.
A small minority live fantastic lives in the US because the US has taken the idea of meritocracy and dialled it up to 11. The floor of the have-nots is much lower in the US in comparison to Europe because businesses have a wider degree of discretion in how they treat and reward employees. The person on the shop floor gets 1 week a year holiday while the regional manager gets 5 weeks a year.
Of course businesses in Europe have some discretion in the upper limits to the benefits they offer their employees but they are still restraint in the lower limits.
These differences I suspect are exactly why the GDP per capita is lower in European countries than in the US. Take Germany for example, an economic powerhouse and the 3rd largest global exporter. Impressive for a nation of just 83 million.
The US has a PPP GDP per capita about $10,000 higher than Germany I find it very difficult to believe the US is $10,000 more productive than Germany. The US just puts more value in wealth creation (business) at the expense of the people.
Europe has it's flaws in some of these things as well (e.g zero hour contracts) however it does better by the people more so than the US.
True, but the problems with communism aren't communism in and of itself either, but the reality is that these things incentivize certain types of behavior nonetheless.
Even if individual capitalist isn't motivated by greed, the market itself is. It's literally built on presumption of infinite growth.
Small and medium sized business, are more like a stage in lifecycle than an exemplar. They either get merged or sold into a larger entity or they grow to become a larger entity.
Totally inaccurate. Having trouble finding sources but something like 99% of small business in US will remain under $5mil annual revenue, a fraction of a percent will be acquired. I'm talking all sectors, not tech.
There is nothing inherent to capitalism that presumes this.
It is shocking, and kind of infuriating, that he whines about going public being his biggest mistake when the only reason it was a problem was because of his companies questionable behaviour.
What is the life expectancy of a unicorn anyway?
Palantir isn't a startup, it's a defense company.
Benioff remarks about governance don't really apply to Valve because even if Valve was poorly managed it would pretty much be Newell misusing its own money.
based on their culture deck it doesn't seem great.
Purely from the standpoint of maximizing value I mean.
Otoh, VC's can't really "extract value" ; they can only sell share to the public or to other VC's.
We are, in fact, conversing on a website owned by a private equity firm.
That's what SoftBank tried to do with WeWork. The company is worth 10 billion (or less) and they tried to sell it to the public markets at 40 billion. Had the public markets not noticed the weird shit going on inside the company and actually bought it at 40+ billion then SoftBank would've made a lot of money. The stock would then most likely decrease over the following years costing those that bought it in the IPO money.
This is why it's so important that public markets are strictly regulated and the SEC forces companies to publish all kinds of things before IPO.
And to complicate matters even more, there are publicly traded private equity partnerships (Blackrock, etc).
tldr, jargon sucks
That's pretty much the only advantage, other than liquidity for early employees, which most companies don't really seem to care about, since many of the early employees have left by the IPO, and the ones that are sticking around for their payout are probably just coasting anyway.
But the disadvantages are numerous. You have to tell your competitors about your profit and loss. You have to hire a bunch of auditors to make sure you follow all the SEC regulations. You can't do any long term bets because the market will skewer you and make it hard to hire. Your every action is up for public scrutiny. Your valuation is no longer flexible when you want to make acquisitions with stock.
That private money needs to return to its LPs, it's not an unlimited term investment.
Following the law is just so onerous and painful.
Sunlight is a wonderful antiseptic.
I'm with Mr. Benioff on the point that private companies can harbor a lot of decay, while over-concentrating wealth. However, data shows that small-firm IPOs are simply not very profitable, and acquisition can be much more attractive: https://www.sec.gov/info/smallbus/acsec/acsec-090712-ritter-...
As companies get larger, the risk for fraud and misdeeds increases. Kickbacks, payoffs, etc. Compliance and auditors are a good thing. Trust but verify.
They have to hire accountants and lawyers, too. What a drag! Things would be better off with only engineers and designers! Oh that drasted HR to make sure we don't discriminate. Drags.
I interface with auditor and compliance teams. I'm an engineering manager. It doesn't consume 100% of my time, nor is it a waste.
You're speaking in hyperboles and extremes. What you're saying just isn't true.
And do you know what value compliance brought to us? Nothing. We were already doing all the necessary things. All we were spending our time on was proving that we were already doing all the required things.
as far as I can tell, your comment boils down to 'hiring internal compliance employees/consultants is not a waste.'
but you didn't say anything to back up that the money going to compliance is not a drag. What value does it add to the business? It seems it just prevents catastrophe (legal problems) and has its own costs (termed 'drag') but doesn't add business value as it does not contribute to the USP of product/service to the customer.
Even in your own case, if compliance takes any % of time there is an opportunity cost: you can't work on something that adds to the product/service because that time is spent on compliance.
Does your comment aim to disagree with that?
Relevant quote: “We need a national privacy law,” he said. “Otherwise you’re going to get a patchwork of privacy laws. We have to get our privacy and data locked down so we know where we’re going. [Regulators] need to be stepping in now and they should be working hard to make those changes.”
If you're a competent CEO, don't expect to be a CEO for very long...what a time to be alive.
CEOs are supposed to be there for the long haul and drive real vision for the product. They're not supposed to be emergency stopgaps parachuted in to calm everyone's tempers because the last guy screwed up one too many times.
If you aren't just about making money in the early days, you're not going to be CEO very long either. The key is figuring out when your company is big enough that you need to pay attention to things other than making money, or at least good enough as signaling/feigning that you care about things other than making money.
Also, let's be realistic in what you're asking for here.
- Founders getting to take cash out earlier
- employees with golden handcuffs that could last forever
- Questionable to outright illegal behavior being completely okay in the private market
- Insane levels of founder control
- massive VC firms willing to pump in enough late money to take pressure off earlier VCs
Then why go public? Especially if a lot of companies seemingly can't survive the IPO completely intact. Just look at WeWork
There are, however, private companies whose business models have largely stabilized like Airbnb and Stripe that I agree should’ve gone public already.
My time is worth more risk wise then some investors bottomless pit of fund dollars (cough SoftBank cough).
If you want to issue options, no right of first refusal. You have to allow the transfer of your shares on a secondary market for accredited investors. You have to provide a cap table to all shareholders, as well as dilution and preferred share info. You have to hand over a 409A valuation annually to all shareholders.
You don’t have to go to the public markets, but you also don’t get to treat common shareholders (usually employees granted ISOs) as second class citizens. If private markets are the new public markets, we still regulate the private markets, just a bit less so.
But your tone in treating employees and shareholders was very antagonistic. The vibe in startups has always been "we're in this together." Not, "I'm the boss/investor and you're the cog."
I think the 'vibe' is part of the problem. It's somewhat dishonest.
Why do all companies need to be 'family?' Can't we just respect each other as we get the job done and go home to our actual families? The 'company culture' is a ruse to get employees to have loyalty where the company does not reciprocate.
reminds me a bit of the blog post: <https://www.yegor256.com/2015/10/06/how-to-be-good-office-sl...
Notoriously, this happens with companies like Uber. If you were friends with Travis, you could sell. If not, you'll go pound sand.
Investors also want to see the books and numbers. Not everyone can sell on hype alone. Even leaked numbers from Uber were taken with huge grains of salt.
Over the counter arrangements and warrants are on dubious legal standings with regards to transfer-controlled private "stock units". Actual shares are a different story, but everyone gives out "stock units" and not shares. It might seem pedantic, but there's a gulf of difference while the company is still private.
This is like simple minded Darwinism where nature is red in tooth and claw. That perspective was not very good at explaining more complex behavior like altruism. All compatible in a neo Darwinian model. Simple minded capitalism is no different but who really believes in simple minded capitalism? This is a strawman.
But not with public companies?
It's an opinion, I'd ask for some data.
I personally don't think the public market cares much about things like privacy and governance. If it were, Facebook would have neither investors nor users. Same goes for so many others.
He then goes into talking about salesforce going public as if it were an exampl. But definitely privacy and governance are not the same for b2b and b2c.
I have been with two startups that got public way too quick, when half of what you're doing is for PR effects in preparing to bring new investors, you forget about the customer. One of them is dead, the other survived after being bought out by a private equity firm. Going public is such a burden for the representation aspect of it that expecting _this_ to br a regulatory practice is delusional. (imo)
This is a silly take. Data privacy is a completely separate issue from corporate governance, and by most analysts who cover it Facebook is considered a particularly well-governed company.
They are probably smart/cynical enough to know that governance in the spirit of laws/regulations is an F