> isn't because its hard or expensive, but because they are getting stupid good deals from private investors to burn through cash.
It's actually both reasons combined. It is more challenging to be a public company today vs 20 years ago, in terms of regulatory compliance and investor pressure. And the private capital markets have massively expanded in that time, effectively enabling any sum of capital required by a private company (as demonstrated so well by Uber). If you're a successful private company, you do not need the public capital markets except as the final liquidation exit. The public market has become the last stop on the exit train, because that capital has the greatest annoyances / friction / pressure / activism with it.
Let's say you're a successful, Yelp-like company. You're not Uber or Facebook. You IPO. You're growing solidly. But uh oh, you miss your quarterly number, you deliver respectable 22% growth instead of 27% growth that was pegged by analysts. And forbid you dare to lower guidance so much as a penny. Your stock is gonna tank. Follow that up with a few quarters of good growth that doesn't hit the expectations, and you're going to find a pile of big activist types pushing for a sale of the company (that is still growing nicely). If you're a private company, and you barely miss growth expectations, your valuation is not going to get cut in half.
It's actually both reasons combined. It is more challenging to be a public company today vs 20 years ago, in terms of regulatory compliance and investor pressure. And the private capital markets have massively expanded in that time, effectively enabling any sum of capital required by a private company (as demonstrated so well by Uber). If you're a successful private company, you do not need the public capital markets except as the final liquidation exit. The public market has become the last stop on the exit train, because that capital has the greatest annoyances / friction / pressure / activism with it.
Let's say you're a successful, Yelp-like company. You're not Uber or Facebook. You IPO. You're growing solidly. But uh oh, you miss your quarterly number, you deliver respectable 22% growth instead of 27% growth that was pegged by analysts. And forbid you dare to lower guidance so much as a penny. Your stock is gonna tank. Follow that up with a few quarters of good growth that doesn't hit the expectations, and you're going to find a pile of big activist types pushing for a sale of the company (that is still growing nicely). If you're a private company, and you barely miss growth expectations, your valuation is not going to get cut in half.