The increasing emphasis on the short term prospects of a publicly traded company is a problem. But is there anything here that's specific to software and web-focused companies? Others have been writing about this for years. John Bogle for example has argued that the increasing concentration of shares in a handful of pensions and mutual funds prevents the company's owners from acting like long-term owners.
For High Tech Companies, Going Public Sucks
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Re: For High Tech Companies, Going Public Sucks
#12Why doesn't anyone mention the private option? Multi-Billion dollar operations like Koch Industries are private. You aren't forced to go public per se.
Did you read that article? Facebook more-or-less was forced to go public.
Re: For High Tech Companies, Going Public Sucks
#13Why doesn't anyone mention the private option? Multi-Billion dollar operations like Koch Industries are private. You aren't forced to go public per se.
Did you read that article? Facebook more-or-less was forced to go public.
It would be more accurate to say that Facebook decided that it would rather go public than stay with If you keep a handful of owners and pay employees with cash-money instead of equity, you can stay private forever. Mars, Inc. was founded in 1911, has revenue ten times as much as Facebook, and has never been forced to go public.
Re: For High Tech Companies, Going Public Sucks
#14Earlier quoted context omitted.
Did you read that article? Facebook more-or-less was forced to go public.
It would be more accurate to say that Facebook decided that it would rather go public than stay with If you keep a handful of owners and pay employees with cash-money instead of equity, you can stay private forever. Mars, Inc. was founded in 1911, has revenue ten times as much as Facebook, and has never been forced to go public.
Mars Inc doesn't compete in an industry where every employee expects to get shares of the company.
Re: For High Tech Companies, Going Public Sucks
#15The increasing emphasis on the short term prospects of a publicly traded company is a problem. But is there anything here that's specific to software and web-focused companies? Others have been writing about this for years. John Bogle for example has argued that the increasing concentration of shares in a handful of pensions and mutual funds prevents the company's owners from acting like long-term owners.
There is something slightly more specific, which is that we have some technology-related gris-gris[1]. The basic problem is that everyone feels more or less qualified to guide a company's technological progress. One very chilling story which exemplifies this comes from about 7-8 minutes into a Clojure talk:
But really what this is is, "I'm afraid. Because I don't want to choose
something that might put my job at risk, and so I will easily pick
something that is less effective but more industry-accepted, rather than
something riskier where I might risk really good success but also
failure." ... I was literally in a meeting at one point with a CTO and
he said, "We believe that the only way this project will ever be a
success is if we pick Delphi, but we're picking PowerBuilder." Knowing
that it's going to fail, but that's the safer choice politically because
if they pick Delphi, they might win, but they might lose and if they
lose and they picked something weird then they get fired.
The gris-gris enter in just about here. Some are owned by the market as a whole, and your owners will be anticipating them and responding to them. But the more dangerous gris-gris will belong to your owners themselves, I suspect -- "You used Lisp? What the hell is that? You're fired."
So that's where I would focus the discussion. Random people on the stock market probably have just enough technical knowledge to think that they know much more than they know. That puts them in a dangerous position when they own your company. If Zuckerberg is careful to keep more than 50% of his company while going public and in doing so releases an open document saying essentially "Facebook is about hackers," I would understand him as trying to violate some taboo on the open market (where "hacker" is a bad word) as well as trying to make sure that people can never muscle out the hacker approach that, in his view, probably makes Facebook exactly what it is. He doesn't want the Ownership to start pressuring the Developers with technological misunderstandings.
[1] A gris-gris (gree-gree) is a voodoo talisman. The key feature here is that it is unquestionably believed to work.
[2] Excerpted from https://blip.tv/clojure/neal-ford-neal-s-master-plan-for-clo...
Re: For High Tech Companies, Going Public Sucks
#16Why doesn't anyone mention the private option? Multi-Billion dollar operations like Koch Industries are private. You aren't forced to go public per se.
Did you read that article? Facebook more-or-less was forced to go public.
For posterity's sake let's make this clear: the SEC rule regarding 500 owners is as follows:
> Companies with more than $10 million in assets whose securities are held by more than 500 owners must file annual and other periodic reports. These reports are available to the public through the SEC's EDGAR database.
Source: Securities Act of 1934, paraphrased in http://www.sec.gov/about/laws.shtml
It requires firms to file special reports. The reason why people presume that it means that the firm must go public is simple: there are only a few additional requirements to go public, and the economic advantages in many cases outweigh the paltry effort.
For posterity's sake, this is worth repeating: THERE IS NOTHING FORCING A FIRM TO GO PUBLIC. NOTHING.
Re: For High Tech Companies, Going Public Sucks
#17The increasing emphasis on the short term prospects of a publicly traded company is a problem. But is there anything here that's specific to software and web-focused companies? Others have been writing about this for years. John Bogle for example has argued that the increasing concentration of shares in a handful of pensions and mutual funds prevents the company's owners from acting like long-term owners.
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Re: For High Tech Companies, Going Public Sucks
#18Why doesn't anyone mention the private option? Multi-Billion dollar operations like Koch Industries are private. You aren't forced to go public per se.
I suspect it's the VC pressure. VC's are mid-term owners, needing to return cash to limited partners 5-7 years after funding.
Going public should be a way to swap VCs out with pension funds and other long-term holders. Unfortunately, our public markets, while doing some of that, also swap in a bunch of short-term holders (who, fairly, are needed in some quantity to give the long-term holders the option to "exit" their position freely as well as know, to some degree of confidence, how much their stake is worth).
Re: For High Tech Companies, Going Public Sucks
#19The increasing emphasis on the short term prospects of a publicly traded company is a problem. But is there anything here that's specific to software and web-focused companies? Others have been writing about this for years. John Bogle for example has argued that the increasing concentration of shares in a handful of pensions and mutual funds prevents the company's owners from acting like long-term owners.
There is something slightly more specific, which is that we have some technology-related gris-gris [1]. The basic problem is that everyone feels more or less qualified to guide a company's technological progress. One very chilling story which exemplifies this comes from about 7-8 minutes into a Clojure talk: But really what this is is, "I'm afraid. Because I don't want to choose something that might put my job at ris…
[deleted]
Re: For High Tech Companies, Going Public Sucks
#20The increasing emphasis on the short term prospects of a publicly traded company is a problem. But is there anything here that's specific to software and web-focused companies? Others have been writing about this for years. John Bogle for example has argued that the increasing concentration of shares in a handful of pensions and mutual funds prevents the company's owners from acting like long-term owners.
Pension funds have longer time horizons than the VCs they are being swapped out with. The issue is that these long-term holders require a fraction of short-term holders to give them liquidity, i.e. the safety of knowing that one can exit the investment without a substantial haircut if one needs to.
The present problem is that the proportion of short-term to long-term holders in the market is too high. The former are there to support the latter.
Another point is that the latter, at some point, demand dividends. The antipathy to Apple that I saw on HN recently when it announced its dividend programme is also anathema to a healthy public capital market.