In the past two years, the average technology startup took between nine and 10 years to go public. That’s a sharp increase from the five to eight years it took for a technology startup to go from conception to IPO in the 80s and 90s. A number of factors have contributed to this change, including easy access to capital, the cost and distractions of going public, and changes in regulations.
Staying private has many advantages. It allows high-growth companies to mature and avoid the short-term pressures and scrutiny public companies face. But remaining private isn’t painless, and the longer a company does so, the more likely it is to face misalignments among stakeholders.
As a company grows, its founders, executives, current employees, former employees, and early investors all see their paper wealth accumulate. But stock options and other forms of illiquid private company equity can’t help them put their kids through college or pay for a new home. As life circumstances change, it becomes increasingly hard for employees to stay focused on work.
This leaves employees, a startup’s biggest assets, vulnerable to poaching — especially by the so-called FAANGs (Facebook, Amazon, Apple, Netflix and Google). They tempt employees away with offers of signing bonuses, bigger salaries, and more valuable equity.