Unicorns don’t need the public market
Why Airbnb, Uber, Lyft, Palantir, and so many others refuse to list
The private markets are more efficient, financing is readily available from venture capitalists, and who can be bothered to report quarterly earnings when they’re busy saving the human race from the inconvenience of mortality?
Nick Colas, the hilarious and insightful ConvergEx writer said that the social compact between public equity markets and society is broken. Over time, any investor should have access to the equity of important enterprises created by that society, but today (by virtue of some misalignment of incentives), the “unicorns” see no need to go public. There are 191 unicorns preventing the public from getting the chance to share in their socially transformative businesses. If this trend of “winners stay private, losers go public” continues, investors will eventually choose to hoard cash, causing capital to stop circulating to its best possible use.
Consider now the pace of innovation. With artificial intelligence, driverless cars, workplace automation, etc., this trend puts too much capital and corporate control in the hands of too few VCs. For scale, there are currently two-thirds of a Trillion dollars of unicorn valuation controlled only by a handful of VCs.
This is not to say unicorns must eventually IPO, but if the concept of public markets is becoming outdated (as we’re seeing with Spotify’s direct listing, the rise of super-voting shares, the unpopularity of IPOs in general, etc.), then it might be worth considering creative market alternatives. Enter Equidate, SeedInvest…
I do think regulatory intervention (in either direction) is not the solution. If private markets are now efficient and capable enough to provide lower cost capital to tons of multi-billion dollar valued companies, then let’s sit back and encourage organic market evolution.
However, for everyone with a 401K invested in public markets: it looks like the trend is not your friend.