Illustration: James Clapham

The Counterintuitive Case for Companies to Stay Private

IPOs used to be a company’s hot coming of age. Now they are more like a company settling into middle age.

Byrne Hobart
Published in
10 min readFeb 27, 2020

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TThe IPO used to be a coming-of-age ritual for new companies: They’d grow up a bit sheltered, raising money from venture capitalists and making their big mistakes in private. Then, at the right time, they’d make their public debut, throw a huge party, and become a real Grown-Up Company for the first time. It’s also a moment when employees and early investors go from theoretically rich to having money they can actually spend.

Pre-IPO, an engineer might know what percentage they own of a company’s stock (due to dilution, this percentage is an upper bound on how much they actually own), and they might know what the company was worth the last time it raised money (due to the dynamics of deal structure, PR, and journalism, this is also an upper bound on how much the company is worth). But after the IPO, you can do some simple long division and convert the cost of a vacation, new car, or new house into a certain number of shares, and quickly convert those shares into cash.

That’s changed. Today, going public is more like becoming middle-aged: It happens gradually, and it entails a transition to a more mature, established phase of the…

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Byrne Hobart
Marker
Writer for

I write about technology (more logos than techne) and economics. Newsletter: https://diff.substack.com/