Startups ‘are staying private way too long’ says Marc Benioff

I remember the YC startup school at De Anza many years ago, when Andrew Mason, of Groupon, was one of the guest speakers and he basically said that the worst mistake he made was going public.[0]<p>And basically what had happened was that post IPO Groupon&#x27;s accounting irregularities, which were earlier hidden, became public and the company fell from grace.<p>Same thing happened recently with WeWork and there have been numerous other companies.<p>Basically, while private, startups are able to engage in practices that don&#x27;t survive under public scrutiny. No wonder startups, especially ones on shaky foundation, are remaining private longer.<p>[0] <a href="https:&#x2F;&#x2F;genius.com&#x2F;Andrew-mason-andrew-mason-at-startup-school-sv-2014-annotated" rel="nofollow">https:&#x2F;&#x2F;genius.com&#x2F;Andrew-mason-andrew-mason-at-startup-scho...</a>

Palantir, 16 years and counting ...<p><a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Palantir_Technologies" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Palantir_Technologies</a><p>What is the life expectancy of a unicorn anyway?

Let me rephrase this: private equity is extracting too much value out of early stage companies and left nothing for the public market.

There are a lot of disadvantages to going public and very few advantages. Most companies these days don&#x27;t need the money because private money is willing to pour billions in, and it&#x27;s pretty cheap to run a company now if you&#x27;re just software.<p>That&#x27;s pretty much the only advantage, other than liquidity for early employees, which most companies don&#x27;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.<p>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&#x27;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.

Admittedly I don&#x27;t particularly follow Marc Benioff and &#x2F; or Salesforce in the news much, but is his advocacy for privacy laws generally considered be an attempt towards regulatory capture?<p>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.”

&gt; “And if your orientation is just about making money, I don’t think you’re going to hang out very long as a CEO or a founder of a company.”<p>If you&#x27;re a competent CEO, don&#x27;t expect to be a CEO for very long...what a time to be alive.

Startups stay private because the regulatory burden of being public is so great. Want to change behavior? Change incentives. It’s simple math.

Or, rephrased, &quot;They become really expensive for me to acquire and add to my crappy pile of product spaghetti in a monopolistic fashion! It would be much better if they went public when the were still cheap.&quot;

It&#x27;ll be interesting to see how this&#x27;ll affect startups down the line. If employees aren&#x27;t cashing out in a reasonable amount of time (or at all), will the majority of startups suffer a brain drain of top talent? Will startups need to come up with a new way of compensation beyond just equity?

Well when you have<p>- Founders getting to take cash out earlier<p>- employees with golden handcuffs that could last forever<p>- Questionable to outright illegal behavior being completely okay in the private market<p>- Insane levels of founder control<p>- massive VC firms willing to pump in enough late money to take pressure off earlier VCs<p>Then why go public? Especially if a lot of companies seemingly can&#x27;t survive the IPO completely intact. Just look at WeWork

Eh. I don’t think it’s a good idea for a startup still going through rapid change (whether releasing new product lines, entering new markets, testing new pricing) to go public, since as soon as you do it’s hard to be “experimental.”<p>There are, however, private companies whose business models have largely stabilized like Airbnb and Stripe that I agree should’ve gone public already.

&gt;“I really strongly believe that capitalism as we know it is dead… that we’re going to see a new kind of capitalism and that new kind of capitalism that’s going to emerge is not the Milton Friedman capitalism that’s just about making money,” said Benioff. “And if your orientation is just about making money, I don’t think you’re going to hang out very long as a CEO or a founder of a company.”<p>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.

Overfitting at its finest

&gt; I think in a lot of private companies these days, we’re seeing governance issues all over the place,”<p>But not with public companies?<p>It&#x27;s an opinion, I&#x27;d ask for some data.<p>I personally don&#x27;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.<p>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.<p>I have been with two startups that got public way too quick, when half of what you&#x27;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)