Possible Solution to Broken Public Markets?
Could it be this easy? Marc Andreessen has a post on the benefits of dual class stock that you have to read. I know it's long, and you like short posts. So do I. Just pace yourself. Pack a snack. It's worth it.
We have a major, major problem in the U.S. capital markets that is hurting innovation, our economy and ultimately society. Yes, that sounds dramatic. Guess what? Things are dramatically bad for public companies. I'm not supposed to quote my book before May 15, but screw it. If you've been at a dinner where I've had a few glasses of wine, you've heard the rant anyway:
"For a long time the path of a start-up was simply a given: entrepreneurs take venture money, they build the business and one day if everything goes well they get to go public. More than just the financial windfall, going public was the ultimate validation that your company had made it. But just as the crash was a cautionary tale of the unseemly side of venture capital and start-up life, so too was it a cautionary tale that going public isn't always the fairy-tale ending it seems to be.
For one thing, all that control and ownership this generation of companies have worked so hard to maintain? That's all gone once you're publicly owned. ....
...Public companies also have to openly state their revenues, losses and profits which a lot of fast growing tech companies consider a competitive disadvantage. Still, that's the least of the hassles. There's also the all-important quarterly earnings dance ...
... Then there's the Wall Street addiction to growth. Sure, companies need to have profits, but even wildly profitable businesses don't do well in the public markets unless they have gaudy revenue growth figures attached to them. If growth stalls, watch out, because here come activist hedge funds to pound the management team, demanding they buy a company or do something dramatic to juice up the stock. Building a business for the long haul rarely happens on Wall Street now that we all live in a world of 24-7 news and short attention spans. It's all about this quarter. And happiness in a public company, especially a tech one, is all about the stock price. Nothing can kill morale more than a stock price that just doesn't move, while a new hotshot stock zooms past.
The government has only made the harsh reality of life as a public company worse in the years since the bust, thanks to something called Sarbanes-Oxley regulations....Instead of punishing bad people, the government just made an already imperfect system worse. ...
..."No thank you," said much of the Web generation looking at the mess.
The rant goes on, but you get the idea. I've spent many dinners talking through what could get the markets back to a spot where the best companies want to go public. To a point where you could build a long-term company and invest for future growth without an insanely efficient and profitable business like Google. I wonder now, if this would be a huge step in the right direction. If so, the stigma needs to die fast.
As a side note: It's another reason Marc is a great fit for Facebook's board. And btw, it takes a lot for Pmarca to change his mind this dramatically! Everyone, remember where you were when you read this post....;)
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