Should all companies go public or does it make sense for some companies to stay private forever or for a very long time? originally appeared on Quora - the knowledge sharing network where compelling questions are answered by people with unique insights.
Generally speaking, most financial investor-backed tech companies will ultimately need an exit. Many choose a strategic transaction where they sell to a larger company, often a large public company. Others make their way to the public markets via an IPO. Ultimately, the decision to go public typically boils down to a few key questions:
- Is the business ready to be public (more of an existential question)?
- Is there pressure from the shareholders and employees for greater liquidity of their shares (more of a practical question)?
- Would the company benefit from a greater access to capital as a public company (more of a strategic question)?
Even some of the largest private, employee-owned companies (e.g., UPS or SAIC), went public after decades of operating as private companies for some of those very reasons.
There is no question that companies are waiting longer to go public these days. The average age of a tech company going public 15-20 years ago was between 5-7 years and now it is more like 7-10 years. Before going public, many companies want to have a bigger scale of revenues, broader products and services to offer customers, a more mature business model from a margin perspective and be closer to profitability/already profitable. Those characteristics can help them deal with the pressures of operating the business and delivering performance under the constant scrutiny of the public markets.
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