Being Public

Two former USV portfolio companies had tough earnings calls last night.

And you look at that and you might say “why would any company want to go public?”

But here is the thing. Being public is about being transparent, accountable, and owning up to the issues and dealing with them.

I think it makes companies better.

If you are losing your biggest customer, you have to tell the world and deal with the consequences.

If you are making a leadership change, you have to tell the world and deal with the consequences.

Both of those companies are great companies, in which the Gotham Gal and I are a very large shareholder, and in which we believe in totally and completely.

Nothing is always up and to the right, even though you might want it to be.

The great companies are the ones that have the guts to bare it all and keep building.

Which is why I think being public is a good thing for the companies we work with that are large enough and have unique and differentiated businesses and business models.

I think more tech companies should be going public and I have been saying that for quite a while now and last night doesn’t change my views one iota.

#stocks#VC & Technology

Comments (Archived):

  1. eldsjal

    I mostly agree with your point on going public, but would be interesting to get your take on the other side — I.e what are good reasons for being (staying or returning) private.

  2. LIAD

    The Etsy news gave me a new perspective on VCs.People talk a lot about great founders being there from day one and seeing things through come what may. We talk much less about VCs doing that.For a VC to be fully committed to a ex-portfolio company even after it’s been trading publicly for several years, and to be prepared to roll up their sleeves, take on significant responsibilities and make the tough calls is really a sign of something special.Like Fred says, VC is a service business with the entrepreneurs and their companies being the customer. Actually walking the walk and actually taking on the mantle is something to admire.

    1. awaldstein

      Agree completely and thought the same after reading around that announcement yesterday.

      1. pointsnfigures

        In ETSY’s case, the early investors might be the best repositories of company history and why things are the way they are. Knowing your roots and history help with all kinds of things. The early investors might be the only people in the room that can “speak for the company”

        1. awaldstein

          True.More and more it becomes clear that Fred is an exception. That is why i spend the time to come here.

    2. falicon

      Etsy has had a number of CEO changes throughout it’s life…and to be fair, Fred mentions that he still has a large stake in the stock, so he’s still very invested in it’s continued success (though your points about VC’s walking the walk is still super valid).At the core of Etsy is the fact that it empowers people to have/run their own small business…that affects/changes/improves many people’s lives, and so I think it’s an important company to keep healthy (beyond just making the shareholders happy I mean)…I do hope that the changes are strategic and for the long term health rather than just current stock price focused.

    3. Richard

      on the other hand, Fred is chairman of the board of ETSY and their are many main st. Investors who have taken it in the chin with this investment.

    4. JLM

      .Let’s not go all Labrador puppy. He owns a boat load of the stock.”Keep your eggs in one basket. Watch the basket. Closely.”JLMwww.themusingsofthebigredca…

  3. awaldstein

    I am undecided whether I agree or not but will rethink based on your post.There is little in the world of business other than missing payroll as a startup struggling for funding that matches the pain of a public thrashing after a disastrous earning call.I almost never say ‘been there done that’ but in these cases i and I’m sure many on the call have.

  4. Vendita Auto

    Uber is every reason not to go public Kakanick has/is IMO doing a great job with this leviathan in its short gestation

    1. fredwilson

      Huh? Maybe did would be a more appropriate word to use

      1. JamesHRH

        This is not a political statement, just a factual / personality / philosophy based one: he’s the Trump of tech, no?

        1. Salt Shaker

          Trump is now publicly traded and publicly accountable; I think in his earlier life (which I guess he now misses) Trump was Travis, primarily accountable to himself.

          1. Anne Libby

            Yes, that’s spot-on.

          2. JLM

            .Trump’s stock is being priced daily. He is not publicly accountable because he doesn’t play that game.His disdain for the media — well deserved — will turn out to be one of the shrewdest moves in the history of politics. He is the only guy living today who could have pulled it off.Why he’s comfortable using the men’s room.The pollsters who got the election wrong are right now? Hmmm.Trump is being regulated by the Republicans in Congress who are, currently, insane and led by the most ineffectual Speaker (who does have some misgivings as to what rest room to use).From the beginning, I always said Trump would have more problems with the Republicans than the Dems. The GOPe still hasn’t given in.Trump is going to run the table.Small point — as a veteran, I have been pissed off about the VA and how they’ve allowed sick vets to wait for 6-24 months for induction and treatment. It is criminal.Trump signed an XO which allows any vet to receive free market health care after 30 days of waiting. It is effective immediately and I know vets who have already taken advantage of it.Real progress.As a vet, I applaud that. Bet you didn’t see that in the media, no?JLMwww.themusingsofthebigredca…

          3. Vendita Auto

            “Trump is going to run the table”

          4. Richard

            no quite, trump signed an extension of a law that was already in place.

          5. JLM

            .Yes, you are technically correct, but the law was not actually being followed because there were no implementation rules. When a law is passed, the agency has to promulgate implementation rules.The 40 mile, 30 day rule never went into widespread use and it was set to expire. It was used in some jurisdictions, but not the ones which had the big problems.Trump signed an XO making it real.The President cannot technically extend a law passed by Congress and I was surprised none of the crazy left protested his action.JLMwww.themusingsofthebigredca…

          6. Joe Cardillo

            Trump fan or not, the public accountability thing still seems TBD to me. Whether he’ll run the table or not seems quite speculative, but you are long on Trump stock I take it! =)

          7. JLM

            .I favored Candidate Trump because of the inedible alternative at the election buffet. Binary choice. Stab wound v gunshot?I predicted he would win because of the 2014 midterms. The country was mad as Hell. I was right and made a lot of bets on it. Pissed off a lot of snowflakes on this blog, but that’s on them.As far as President Trump, I hold him to the same standard I did President Obama — policy, results, body count.There is a lot to not like about President Trump, but a lot of that is behind us. Still, I’m not one to defend anybody who chatters about grabbing pussy.The Twitter business is a little weird, but I think I get it. “Go home with the gal who brung you.” Darrell Royal, Longhorn coach.Post-election, the only thing I feel any sympathy for is the total continuing media war against the guy. Not a lot, cause he can handle himself. A little.I don’t subscribe to 100 day report cards, so I’m not ready to give any grades, but the stubbed toe — ouch — on the Repeal & Replace (on Speaker Ryan’s tab) is big league amateurish.Clowns had five years to think it through and 4 months to work their deal. Shame on them all.He’s got a great national defense cabinet and already the world is wondering “What is Trump up to?” when six months they were wondering “What is Putin up to?”Trump has done a lot of stuff right, but he’s still settling into the job. Have to give him credit for launching into stuff, not letting anything grow moss, and meeting a lot of foreign leaders.I think his calculus on China, North Korea, Taiwan, trade is brilliant. We shall see. I think Xi actually likes him.I just care about policy, results, body count.JLMwww.themusingsofthebigredca…

          8. sigmaalgebra

            > Still, I’m not one to defend anybody who chatters about grabbing pussy.I’ll defend Trump on that one: Basically he was being a good mentor to that guy, man to man, in private. And what Trump said, that some women would so permit, was exactly correct. I wish Dad had told me that. I wouldn’t have done it, but it was super important for me to know that much about human females that I did learn but much later than I should have. Trump did that young guy a big uncle favor. The closest Dad came to giving me that advice was “Some girls will pull it out and sit on it for you.” That was good information for a boy of 13 to get, but there was much more he should have told me.In spite of the lying media, Trump never actually said he had ever done such a thing. But, if at some point when he was not married and some woman clearly wanted such, then maybe so — try to please her, at least not disappoint her..Next, before we get all wound up like some Southern Baptist preacher about molesting Vera Pure, remember some simple, bottom line, bold, blunt facts: It was a NJ debutante and graduate of Miss Porter’s School, right, the same school Jackie (right, Mrs. Charisma-Colossus herself) went to. Right, it was Mimi Alford. Right, White House intern. Right, she and JFK were in a WH bath tub playing with little toy ducks. Jackie was traveling that day. And the little hanky-panky started with JFK doing to Miss Alford, engaged, in the White House, just EXACTLY what Trump explained that some women would permit, and, indeed, she did just so permit.Details are in a book Miss Alford wrote and also in an interview at http://rockcenter.nbcnews.c…So, before we get all wound up, bent out of shape, offended, in moral outrage and indignation, and ready to tar and feather Trump for giving a little quite important mentoring to a young man, e.g., that every father and uncle VERY much needs to know and thoroughly understand, we should understand JFK. E.g., the liberal snowflakes totally in love with their Democrat hero of Camelot JFK need to understand that what they are all wound up and running off to their safe spaces about what Trump just explained as some birds and bees facts of life to a young man JFK actually DID.A little reality check, folks.When I was 15, a girl 13 put on some blue jeans about two years old and two sizes too small, walked me out, sat down with her knees about 18″ apart, looked up at me, and said “I need to find someone I can trust” — we’d never kissed yet.As a high school senior, I built a go cart from an old lawn mower engine, drove it to the house of a girl I’d once taken to a movie, and inside she, in her short, full skirt, suddenly jumped on me, wrapped her arms around my neck and her legs around my waist.When I was 9 a girl 10 in the neighborhood had us walk to a tool shed and said “I’ll show you if you show me.”When I was a college freshman, on my first date with a girl, as we were sitting in the car waiting for the engine to warm up, she asked me if I loved her. I was honest and said no. Then she said, “We can pretend, can’t we?”.When I was a college prof and chair of the college computing committee, a staff member asked me to come to her office to discuss a computer application. She faced me, leaned back in her desk chair, put her feet up on her desk, not careful with her skirt, and explained that “she had an open marriage”. Well, I didn’t!When college coeds chip in for a gallon of vodka and a case of Gatoraid, guzzle a lot of it, put on very little, and head to a party, with some Plan B, they are looking for tutoring for their calculus homework?I’ve got some more such stories. I’m sure that 50+% of men my age have many such stories, also.As far as I can see, Trump did that guy a nice uncle type favor and otherwise did nothing wrong.

          9. sigmaalgebra

            I’m “long on Trump stock” too.Early in the campaigning, I posted a lot of support for Trump here. I had my views out there, unambiguously, in black and white. Or, the pundits and nearly everything connected with NYC and the MSM were wrong, and I was right. And I gave my reasons, and I believe that they were the right reasons, the reasons he won.

          10. Vendita Auto

            Personal I do not like Trump’s personality or ethics but “which I guess he now misses” I would not presume to guess [fake news]

      2. Vendita Auto

        If it was i would have used it

  5. JimHirshfield

    VC exits are hard without portfolio companies becoming, or being acquired by, public companies. So…makes sense.

    1. LE

      I wonder to what extent this is baked into the investing vetting process? What percentage of companies that appear to have no interest in going public in the future (if it is discussed) actually go public? What percentage of the companies that say they will definitely go public (talk that game) end up saying ‘nah we changed our mind’?You know when people get married they typically discuss various issues (or they should be discussing) as far as kids, religion, family and so on. And sure many times a spouse is not honest and just says what the other person wants to hear. I guess I am curious if this is a topic that is discussed at all and if not why not and for what reasons.Seat of the pants without knowing more if I was an investor and someone indicated they had no interest in ‘kids’ (going public) I would move on and not go down that road. Seems though that it isn’t that simple.

  6. Salt Shaker

    “Large enough” w/ respect to company size and growth should obv be part of the senior criteria for going public, but shouldn’t the second part of that sentence (“having unique and differentiating businesses and business models”) be a requisite or desirable goal for all companies, whether public or private?There are way too many parity products/services being funded that turn into parody products. The evaluative criteria for funding seems too often to neglect differentiation (and perhaps even, dare I say, market need), which casts a “halo” on the whole startup industry when so many subsequently fail. A low % of exits may work for VC’s, but far too many individuals (re: employees) end up w/ squat and don’t understand or appreciate the upfront risks/rewards.If a company isn’t differentiating (w/ mkt need clearly identified), then it shouldn’t be funded. VC’s can afford the risk, but most others in the food chain prob can’t.

    1. LE

      A low % of exits may work for VC’s, but far too many individuals (re: employees) end up w/ squat and don’t understand or appreciate the upfront risks/rewards.I am thinking this is even more of an issue than it has ever been in the past with respect to the younger people that work at startups. That attitude helps those startups and is great for the industry but as you are pointing out not great for the individuals that take the risks.More ‘get rich quick’ than I will guess has ever been the case.

  7. jason wright

    in the spirit of transparency…which companies are you talking about?

    1. Salt Shaker


    2. fredwilson

      I avoided naming them intentionally

      1. jason wright

        i know you did, and i assume because you want the principles of public verses private to be the focus of of our thoughts and the discussion. nevertheless, putting a bit of flesh on the bone can help. i hope that chair is comfy.

      2. leigh

        I would be interested to know from the perspective of seeing how they handled it. Two different companies both down, with two different management Teams – would be interesting to see the similarities and differences on approach

        1. pointsnfigures

          Down depends on perspective. Users love them. Missing one earnings period isn’t cause for alarm or “all hands on deck”.

  8. Tom Labus

    Benjamin Graham is with you on this “value investing” call.

  9. William Mougayar

    Being public also means you have to manage public expectations, and try to avoid surprises that the Street didn’t expect. It is an art, and takes some experience. Eventually the truth comes out about company performance, but it’s how it comes out that can make a difference. I worked for 2 large public companies and saw how they did that. The good news for the other 2 companies mentioned here is,- the bad news is behind them, and they can move forward, because their fundamental outlook is strong. Wall Street has a short memory.

    1. Candyman

      Managing expectations is a great point. The IPO process puts such a big emphasis on hype and opportunity it creates high prices but leaves investors without a balanced view that includes risks like customer concentration and volatile growth. The story is all “up and to the right” but that’s not realistic. Part of the IPO is viewed as a “branding exercise” and too much emphasis is put on the positives without much if any consideration of the challenges. (Sure it’s in the prospectus for the 1% of investors who study that.

    2. awaldstein

      Bad news is bad news whether expected or not and you are still skewered.Sure managing the street is an art.You must have more info than i have to state that bad news for these two cos is behind them. Nothing is resolved that quickly.

      1. LE

        You must have more info than i have to state that bad news for these two cos is behind them.The bad news that was disclosed is behind them. I am guessing that is his literal point.- CEO left company A. – Company B lost a major customer.If you had a friend that told you ‘the bad news is behind me the Doctor says I am free of cancer!’ would you take the same attitude? It’s implied that nobody knows the future.

        1. awaldstein

          not a correct correlation.

          1. LE

            I am defending @wmoug:disqus to counter what appears to be your constant need to poke at him. Why not put more effort into a reply rather than just a lower case ‘not a correct correlation’ which adds nothing to the conversation.

        2. JLM

          .Fair to say THIS bad news is behind them?Losing a big customer, changing out a CEO — directly from the top five list of things that happen.NO. BIG. DEAL.JLMwww.themusingsofthebigredca…

          1. LE

            Once again I took it literally to mean the news relating to those two events was behind them and they can now move forward. Of course it’s a big event and a BIG DEAL. But both companies are doing real things.In the case of ‘Company B’ they lost a customer that accounted for 12 percent of their revenue. (And there is another customer that I see also makes up a nice portion of revenue but hey that’s business..) That sucks but it’s not cancer and there is the potential actually (to positively spin this) that this near death experience will be an event that puts the fear of god in the sales and employee base to not rest on their laurels and take success for granted. People do that you know. It’s what happened to GM and many other companies. Fat and Lazy. I see that as the psychological impact. Like a health scare. This is not an insurmountable problem.In the case of ‘Company A’ replacing the CEO and laying off people is also has the upside of bringing in new direction and cutting costs. I am also noting that they have a new chairman of the board as well. And it’s not Frank Sinatra.

          2. JLM

            .I don’t think Twilio lost Uber completely. Uber announced they were going to cut back, not eliminate.Anointing Freddie as Chairman is a good move in my view, but there will be a lot of the Illuminati who will say, “Great VC, but what does he know about public company board chairmaning? Different game?”An unknown is always a negative. Not fair, but true.JLMwww.themusingsofthebigredca…

    3. JamesHRH

      The problem seems to be that, the longer you are public, the more Wall St becomes your core customer.

      1. pointsnfigures

        Depends. You can ignore them. Or you can actively manage them.

        1. JamesHRH

          Well, you are talking about the right thing to do.I am talking about what happens more often than not.

          1. pointsnfigures

            Public CEO’s forget they have the power, not outsiders or Wall Street. Instead of just building a company culture, they are building an exterior culture as well. Think about how Jobs talked about Apple compared to Cook’s presence with Apple. With startup IPOs, I think it’s important for the CEO to treat Wall Street (and the public) just like they treated their first investor. You have to take them to the mountaintop to see what you see.

          2. Joe Cardillo

            Good point, and also one of the embedded lessons from social media (which somehow is still being learned by some): the conversation is happening anyway, whether you choose to be involved or not.

          3. JamesHRH

            I think its a squeaky wheel issue, they see the Wall St folks more often.

      2. JLM

        .The Street and the number of analysts covering the company which is a function of the number of shares outstanding and the market cap.One of the great things about the Internet is joints like Motley Fool which can pitch a dark company into the light and drive volume.JLMwww.themusingsofthebigredca…

  10. Candyman

    Company maturity matters. I’d also like to see a more balanced IPO process in which the presentation (the only thing most people look at) includes more coverage of the risks. Many shareholders are individuals. We’ve covered TWLO closely and know them and the space well. We’ll be digging in for the long haul. (Unless someone steps in with M&A as I see them as a very strategic piece of infrastructure.)

  11. Matt Zagaja

    We all have our tough periods:…They’re not fun, but you’re right, everyone ends up better off if they figure out how to get through them.

    1. Candyman

      This was awesome to watch! Thanks a ton for posting it here! Love it!

    2. JamesHRH

      That’s an all time dip on the up and to the right chart.

  12. Girish Mehta

    Re : “Being public is about being transparent, accountable, and owning up to the issues and dealing with them”.The first part is true.The last part – Owning up and Dealing with issues – are two distinct things.A consequence of managing the expectation of shareholders (and the incentive created by executive stock based compensation) is that it has become extremely difficult for public companies to take the long-term view to properly deal with issues and opportunities (some exceptions, e.g. Amazon).What happens is the “90 day shot clock” – on day 1 of week 1 the clock starts ticking to hit that quarter’s number which forces everybody in the organization to optimize for hitting that quarter’s number at all costs….and addressing issues is pushed to the next quarter…and then the next..A private company, IF they choose to, has a much longer runway to DEAL with issues properly…but they need to practise the internal accountability to OWN up to the issues themselves (they aren’t required/owe it to the public).While a public company is required by definition to OWN up to the issues, the “90 day shot clock” makes it difficult to DEAL with issues with the right long-term perspective, and makes them susceptible to short-term band aids (often this comes by downplaying the issues ..).

    1. David A. Frankel

      Spot on. My sentiments exactly. Not every successful private company is prepared for this shift when they go public. The earnings calendar brings a huge cultural change to decision making, hiring, and planning that can be crippling to a growing company if they do not manage it correctly.Fred, I get your point about accountability and transparency and agree there, but I disagree that being public makes all companies better. If you don’t already have a measure of discipline, accountability and transparency before you go public, you will and your team will be in for a very rude awakening when you do.

      1. Salt Shaker

        Without transparency and accountability, it’s a facade.

    2. JamesHRH

      I wish I had kept the reference, but it turns out that Wall St’s maniacal short term focus……delivers financial results on par with private companies.Its not the particular discipline you choose that is important, its that an exterior discipline exists.

      1. LE

        With a wide net though how would this data even be available for ‘private’ companies? Here and there spot sure. But ‘private’ companies aren’t releasing information for comparisons sake, at least the ones that have decided to not go public.

        1. JamesHRH

          Longituduinal study, with requests to comparable private companies, anonymous, pooled, etc.Saw this over a decade ago and it never left me: its not that you do A, B or C, its that you do one of them with discipline.

    3. Twain Twain

      Bankers are very rarely ex-founders and startup operators. They usually go straight from an MBA at a top school to management consultancy and banking.So that knowledge gap means they often build strategic views according to how the numbers look and value extraction — not on the other complexities which the founder and startup operator has to hands-on deal with.Two different sets of training and mentality.

      1. PhilipSugar

        This is correct and it ties into my comment a couple of days ago. You have people that have never been used to adversity or losing. Therefore they don’t deal with losing well. Look at Fred, he must have lost some money, but how does he handle it?

      2. Salt Shaker

        Isn’t that part of the prob w/ respect to how WS analysts evaluate companies? Biz is nuanced and w/ out operating experience many analysts may look at companies solely using the same financial prism. Are they equipped to identify/see future growth opps? Not saying all have a myopic view, but their training is (somewhat) inherently fraught w/ one-dimensionality.

        1. Twain Twain

          I literally just commented on Albert Wenger’s blog about signal losses when investors over-rely on quant data and don’t go deep enough into qualia.Qualia is very nuanced and it doesn’t necessarily appear in spreadsheets on Enterprise Value.As a banker, I was something of a rarity. My team was Columbia MBA, Harvard MBA, Cambridge PhD, NYU Stern MBA. They’d all worked in finance or consulting.Sure, I did a joint degree (Maths+Mgmt) which meant it was easy for the bank to despatch me to the Corporate Finance course taught by the Dean of INSEAD, for example. I was the youngest person in that class, by about 10 years.However, there was operational experience outside of banking that meant my strategic understanding of our portfolio and tech was different from most of my peers at other banks.Nuance brings all sorts of competitive advantages to a team.

          1. JLM

            .What language did they teach in?JLMwww.themusingsofthebigredca…

          2. Twain Twain

            Not in the language of “Joe+Jane on Main street” — LOL.The then Dean of INSEAD is one of the cleverest people I’ve ever met, by the way. He shared a schema that integrated different line items in the P&L and balance sheet I’ve never seen anywhere else.Right this moment, I’m in an AWS training session. It’s so obvious Bezos is a former banker with AWS’s “spot instances”. https://uploads.disquscdn.c…The language when speaking with bankers+investors is different from speaking with consumers is different from speaking with technical product folks and engineers and different from legislators+regulators and sourcing partners.The CEO’s media advisors may not necessarily have that coherent multi-fluency, so he/she needs to be aware of this.

          3. JLM

            .English or French?JLMwww.themusingsofthebigredca…

          4. Twain Twain

            English. The class was at our London offices. The bank selects 20-30 people from its global employees for special training. Bear in mind I had the most phenomenal of phenomenal male managers who entrusted me with autonomy to “Get on with it, Twain! Solve that problem!” so he despatched me to all the best classes.Even if the Dean of INSEAD had taught it in French, I’d have been “completement au fait” with it parce que j’ai reussi mon DFA2 à l’Institut Français. I can read les bilans (balance sheets) and write compte-rendus (formal reports) of them.Yup, I can read and understand the financial pages of Les Echos with no problems.One of my essays in French was on “Sino-French strategic alliances and their hidden value traps.”

          5. JLM


          6. Twain Twain

            My parents are multi-lingual and the Liberal Arts and Sciences were given equal importance throughout our earliest years.So I can do the things I do today because of that basis.And my parents instilled into us the principles of continuous learning. That’s why I now sit in on database & AI classes — even when I learnt some of those things as a teenager!

          7. JLM

            .The biggest sweepstakes in the world is the parental sweepstakes. You won big. Congratulations.JLMwww.themusingsofthebigredca…

          8. Twain Twain

            If investors believe they’re “like parents to wilful and talented kids” (as Fred rightly said in his MIT talk on General Doriot), mine need to be as deft and patient at cultivating potential as my parents and my former managers.There are amazing senior management who do put people before numbers. The CTO of ‘The Daily Mail’ posted this the other day: https://uploads.disquscdn.c…”Here it suffices to say, we must be champions of our employees, dream their dreams, recognise and celebrate their successes, provide career paths, vision. Above all, we must be kind, brave and genuine.There is no ‘too early’ to do what is right for our employees.There is only ‘too late’.”For Twilio and Etsy, the hit to share price is temporary. If senior management can look their employees in the eye, knowing that they did the best (under the circumstances) for them, then that’s what counts.Value and share price are two different entities.

          9. Chimpwithcans

            Welcome back, monsieur!

          10. JLM

            .Merci beaucoup, mon ami.JLMwww.themusingsofthebigredca…

    4. Richard

      1) but, volatility goes in two directions, meaning that it takes just 90 days to get back on track, and companies get paid in advance (etsy $3) to play in this game2) Yet, Volatility is at an all time low for publically traded companies.3) And, These are the best of times for on line retailers.4) Big Picture, look at earnings transcripts and you’ll see 9% of earning go back into FB marketing.

    5. Rob Larson

      It depends how strong the leadership is. A strong CEO will be skilled at communicating what the company is aiming for, which will inspire investors to go along for the ride, rather than focus on quarter results. A weak CEO will worry about meeting the expectations of Wall St analysts, and will allow them to set the company’s quarterly priorities, in the way you described.Look at Elon Musk – Tesla has had maybe 2 narrowly profitable quarters in the entire company’s existence, yet their stock is valued more than GM/Ford because people believe in his leadership.Similar story with Bezos and Amazon. He doesn’t manage the company around quarterly earnings calls – he manages it the way he thinks best for long term, and then communicates it outward in a way that investors will buy into his vision.If the CEO is weak and worried about keeping his/her job, then what you said is true. If the CEO is strong, then being public will not hurt the company. (I realize what I describe as “strong” is a very high bar that few can easily reach, but that is what all CEOs should aim for and try to become.)

      1. PhilipSugar

        Great comment. Again, look at the theme. “is weak and worried about keeping his/her job” My theme this week is the fear of losing is poison. Hating losing is great but fearing losing is very bad for growing companies.It goes to another theme of mine which is make a decision quickly and if it’s not the right decision correct it quickly.

        1. Rob Larson

          “the fear of losing is poison”Love this – so true. Especially true any time your are trying to make a sale – to investors, to customers, to potential employees, to actual employees – you name it. The smell of desperation does not inspire trust or confidence.

      2. Girish Mehta

        Like I mentioned above Amazon is an exception. And there are a few others.Had commented here a few months back that one of the biggest strength’s of Bezos was his ability to manage Wall Street.In some things, I am more comfortable thinking of Bezos as an exception rather than as a example.

        1. Rob Larson

          Bezos’s ability to compete in seemingly all segments of the economy, from rockets to retail to cloud infrastructure to TV show content creation, is uniquely Bezos and can’t be emulated.The ability to set an effective long term strategy and then sell investors on your vision rather than chasing quarterly earnings expectations is a skill that can be learned to some extent, and should be learned to whatever extent possible.

          1. JLM

            .He is out in front of the entire world and anyone trying to catch up has to ask themselves, “Why?”The funny thing is he’s just a distributor. You think “one click” isn’t a thing?He is the supply chain. I just ordered 1000 yards of 200 lbs test braided nylon fishing line to string up creeping vines with — had more than 20 choices.No, Amazon is one of a kind. AWS would be a unicorn by itself.”Your margin is my opportunity.”I cannot remember the last time I didn’t find what I wanted on Amazon.OK, no Texas BBQ.JLMwww.themusingsofthebigredca…

          2. jason wright

            are you out on probation?

          3. JLM

            .Yes and no. I never had a cross word with Freddie, contrary to speculation on this blog. No emails, phone calls, bomb threats. Not the way he rolls and I was not likely a willing recipient.As a gentleman, I took a little break because certain folks were exhibiting a very thin, whiny skin. Most folks have come to grips that Donald J Trump is President. Most folks, not all.Plus, I got a lot of emails.I promise not to behave. And, yes, Trump will run the table and the Republicans will win more seats in the Senate in 2018.BTW, there are several folks on this blog with whom I made bets who have not paid up. Y’all know who you are.I’ve collected slightly more than $6,000 and a lot of BBQ.JLMwww.themusingsofthebigredca…

          4. JamesHRH

            I feel better about getting the better of you on the BBQ Betting Circuit.I have faith in your ability to keep your promise.

          5. JLM

            .Dude, the second you won, who offered up the stakes? Mois. Did you have to chase me? No.Your BBQ is waiting, Jimmy. I am headed to Green Mesquite to test it for you.Including you, I lost exactly one such bet. And yours was a clever one. Of course, you are a shrewd international bettor.Still, I lost. You won. I have your Q, when you arrive to claim it. I will even throw in another sausage tortilla wrap.JLMwww.themusingsofthebigredca…

          6. Lawrence Brass

            Wow… you could pose with FAKEGRIMLOCK for a photo shoot for posterity.Seeing you here makes me very happy indeed Jeff… I mean, Sir.Welcome back!

          7. William Mougayar

            Really? Cut the crap. You just missed us 😉

          8. Russell

            Welcome back, although we’ll have to agree to disagree on Trump.

          9. JLM

            .I am back to ensure your conversion to a Trump zealot goes smoothly, Russell. Don’t fight it. Go with it.I don’t really care about him personally — just his policies, his results, and the body count.JLMwww.themusingsofthebigredca…

          10. awaldstein

            you are really here to reengage with the mission to carry on the process of converting us to forgive the man and praise his policies?though actually quite glad to see you.with that I’ll take a needed vacation.

          11. JLM

            .Come on, Arnold. I am a realist. I would rather press coal to make diamonds than try to convert you. I am deplorable and you are unconvertible.I care not about the man and his forgiveness. I just want my country back and I want it to be the platform for an obscene amount of success for my friends, like you.It is about results first and last.I am not really trying to convert anyone (except for Russell who reached out to me). I tell you the facts and the facts work their magic.I like where we’re headed, but I am easy. And, easily satisfied.Hope you’re going somewhere great and I know they will have good wine.JLMwww.themusingsofthebigredca…

          12. awaldstein

            Sorry my friend.If the only thing to be talked about is politics then we have nothing to talk about at all.If no topic, no post, no thought, no idea, no matter how interesting has to be laced with this, I’m not in.I come here to find a thought to lead my day at times. I can find all the crap I need in plastic bags with river rats scuttling underneath outside my door any morning at dawn when I head to the gym.With you it seems–or so it seems today at least– that is the only topic be it ceo gestalt (of which you are astute as any) or solar power or electric cars.All good. I am truly happy to know you are alive and well as we’ve shared a meal together and I remember it fondly.We all choose where we hang out from what we want to drive our days.I don’t relish this as the underlying innuendo of daily life. There are enough reminders of that everywhere.

          13. JLM

            .Drama.I was just at one of my writer’s groups. We were discussing “… the underlying innuendo of daily life …”. The appellate Judge in the group told me I was full of crap.Harsh critic, she is.JLMwww.themusingsofthebigredca…

          14. jason wright

            well, i’m happy to see you back and in fine form. groupthink – no thanks.

          15. Donna Brewington White

            Your comments are sometimes like hard liquor. Neat. 😉

          16. PhilipSugar

            This is a great quote: “your margin is my opportunity” I have thought like many business people that high gross margin is the biggest blessing.With the internet it is now a curse.

      3. JLM

        .Count me amongst those who think Tesla will turn out to be one of the biggest head fakes in the history of WS — purely from a valuation basis.It is in the stratosphere, as it relates to value, while it is in a commodity business. The valuation is tied to the mythical future.Give Elon Musk his due, the guy has strutted about without anyone saying, “Hey, the Emperor has no clothes on.”Great car. Visionary guy. Huge, well funded competitors.You are not going to be more valuable producing 70K units per annum when you are competing with guys who produce 3MM units.I’ve been watching this for a long time:http://themusingsofthebigre…It cannot continue forever.JLMwww.themusingsofthebigredca…

        1. Girish Mehta

          Tesla’s valuation is going to be the case study of this period for what Marks said – ““Investment success doesn’t come from buying “good things”, but rather from buying things well”.Welcome Back !

          1. LE

            As predicted.

          2. JLM

            .You talking about Tesla or Amber Heard?JLMwww.themusingsofthebigredca…

          1. JLM

            .Haha, favorite clip. I finished a project I was working on and then there’s the move.JLMwww.themusingsofthebigredca…

        2. PhilipSugar

          I am not saying you are wrong one bit, but people are looking at Tesla as the “Apple” of the auto industry, and many of the people evaluating it own Tesla’s.That is they will take a commodity business and build a very profitable company based on superior design and operating system.I am not convinced for two reasons. I can’t speak for Ford, but GM has really improved their cars and service. The second is people ignore the flyover states.The best three selling autos?Ford F Series 821kChevy Sliverado 570kDodge Ram 481kSee a trend? Sure if you are a banker living in NYC, SF or London you can’t even imagine driving one of these.But for the 2mm people that bought one of those and I’m not counting SUV’s they can’t imagine driving a Tesla. That’s not the same as the iPhone.

          1. JLM

            .Apple sells 50MM phones a quarter. Tesla sells 70K vehicles a year.GM sells 3MM + units in the US annually.They are not comparable.Tesla is a great product for every one of its 250 miles until it needs a transfusion of coal produced electricity.GM, Ford are going to produce great electric cars — eventually. Then it really gets shitty for Tesla. Today they have first mover and cool design advantage.And, they have Musk, who isn’t chopped liver. He has Amber Heard which says something. You decipher that.Tesla doesn’t sell out soon?Elon Musk is a hustler and when he folded his solar company into Tesla, it was a hustler’s move. Cars, batteries, solar, solar roof shingles — find a focus and stop hustling.JLMwww.themusingsofthebigredca…

          2. sigmaalgebra

            And Musk has gotten how much in Green Blob subsidies from the Feds? I doubt that Trump wants to continue that scam.

          3. SFG

            Good to see you on here again, brother.Elon loses money in the most fashionable and charismatic way possible! Love the guy, hate the stock.

          4. LE

            Yeah I don’t get it which means I am either really right or really wrong.Got an iphone on the first day and from the start there was no secret as far as the benefits of that (to me at least) despite some of the nay sayers at the time. But by the same token I bought into Apple and for that matter Unix in the early 80’s both of which took decades to catch on with the rest of the world.Tesla on the other hand is entering a market where people care less about cars than they ever did. You are a bit younger than I am but I remember the days when the car your Dad had defined you in many ways to your friends. My 15 year old stepson and his friends could care one iota the car that I drive and that is the same car that we all wanted when we were growing up. I don’t think he cares about Tesla or any car. Part of the reason is that millenials are all catered to with all of their needs not like when we were growing up (or at least me or where I lived).WSJ article the other day. Essentially ‘people don’t need to see the car anymore to buy it’. What a direction that is. This isn’t good for the big Three or any automakers, including Tesla.…Fuel efficiency and fuel cost isn’t a big enough pain point for enough people to pay more for a Tesla. It’s like organic food.Bottom line shift with autos is like many other things that are going on. People have more distractions and entertainment and a car isn’t the big thrill that it was years ago in the black and white TV era. Tesla isn’t going to change that.

          5. awaldstein

            I am actually long on him. The electric grid is the thing that gives it value, the cars and the roofing tiles just feed the system.Agree not an Apple but a visionary.Maybe just a rich guy imagiing a different world and funding companies but I like a crazy person with good intentions.We need this grid and a culture that supports it.Also need to say, kind of love his Boring Company as well.

          6. PhilipSugar

            Don’t get me wrong, I am rooting for him. I think it is absolutely dreadful that the U.S. has essentially excluded new automakers by laws and regulations. No different than high speed internet. I hope he wins. I’d buy the second gen roof.

          7. awaldstein

            We agree on this one.I’m rooting for him and for change.My first paid writing job was (can’t believe I”m sharing this) for Citizens for a Solar Washington. A believer for a lifetime.

          8. PhilipSugar

            I really want somebody to do an analysis on the overall carbon cost, but I love the concept of being self sufficient. I.e. not on the grid.Same for having a home garden and a greenhouse which I have. Worth it? Probably not but fulfilling? Yes.

          9. awaldstein

            I’ve always approached things from that perspective first as well.Where self fulfillment meets basic ethical and cultural goods are the things that draw me in honestly.

          10. Rob Larson

            I agree with this 100%. Tesla’s stock is valued so richly that I would hesitate to go long the stock right now, but on the other hand I wouldn’t short it either. I would never bet against Elon under any circumstances.

          11. awaldstein

            We need big vision to create huge change.Stock and his companies aside, much of where he is heading will come to pass whether through him or others.I just can’t help supporting impossible dreams that we need to make real.Optimist here obviously

          12. sigmaalgebra

            I bought a Chevy S-10 Blazer, and the main reason was that it was based on the corresponding light truck that could plow snow, pull trailers, haul hay, bricks, lumber, and hogs, and work in all weather on roads or off.I’ve been glad ever since. I has 220,000+ miles on it, with lots of problems, but the truck part has been rock solid — 100% original springs, shocks, bushings, etc. in the suspension! E.g., two weeks ago I was in the wrong lane and about to be forced from NY to NJ, turned left which meant I went off the road and jumped a curb, waited a few seconds, and entered the road I wanted. No problem — jump curbs just fine.One reason people buy light trucks is that they really are rugged. E.g., all those big shots in black Chevy Suburbans are riding on a Silverado truck chassis.Now fit one of those with a Chevy big block 572 cubic inch crate engine with two turbo chargers, with air to water intercoolers, about 900 HP, and have some real performance!

        3. ZekeV

          I would root for Elon, except that he wants to lock us all into a world where everyone drives a car dependent on Tesla-owned standards (whether or not an actual Tesla) and he gets a vig for all auto transport, possibly all transport period. Also he puts an iPad in the middle of the dash. As it is, I have to find old analog vehicle on Craigslist if I don’t want to be forced to watch cartoons while I drive. And I heard the goal is to remove human drivers, so we just sit there and watch adsense rolls while we are carted back and forth from work /school. Ugh.

          1. JLM

            .The guy has started the first new car company which has gained traction. There has been a lot of gov’t support and luck to date. But, the guy has done it.Now, the question is can he make more than 70K cars per year?There is a way to do it, but can he do it?JLMwww.themusingsofthebigredca…

        4. Rob Larson

          Of course you are correct that Tesla is richly valued (to put it mildly). And as I see it, that fact actually supports my point, which is that a strong, visionary leader can inspire investors to believe in his long term vision, rather than focusing exclusively on quarterly earnings estimates. In Tesla’s case, investors may have believed in his vision a little too much, in fact.

          1. JLM

            .Inspiration will get a fire started, but it won’t sustain one. I think Elon Musk is an extraordinary, world class entrepreneurial talent but banging out 3MM+ cars like GM is no easy or mean feat.That’s the pool he’s chosen to swim in. At some time the other sharks decide to take him head to head.JLMwww.themusingsofthebigredca…

          2. Girish Mehta

            Inspiration is for amateur investors.The successful public market investors over long periods of time – inspiration is not usually high on their criteria.If he does nothing else, Musk will go down as an extraordinarily brilliant entrepreneur of these times.Tesla’s valuation might well become a case study of “what were they thinking” for these times. The valuation, not the product.p.s. Referring to public market valuations. Otherwise Uber would be on the list, but apples and oranges.

        5. george

          Welcome back, many in the community are very glad!I’m taking a different position on Tesla: They have the potential to be really special. Tesla is transforming the auto industry – reengineering the manufacturing process, supply-chain, sales distribution, fuel stations and service model. The days of large dealerships and service centers are going away.Essentially, this is a replay of the Telecom industry – most of the auto makers own the old landline business, Tesla owns the wireless market; the transition is in-process and eventually the sales distribution shifts in Tesla’s favor.

          1. JLM

            .The Texas legislature just turned down the “Tesla bill” which would have allowed cars to be sold directly to the public.Big public policy test because Texas is a huge consumer and doesn’t have the California problems as to state standards.The Texas legislature doesn’t meet again until 2019, so no way Tesla gets its way in Texas.The infrastructure of the dealership network is entrenched and codified in state laws across the US. The big car companies — who have production plants which command state respect — don’t want to see the disbanding of the dealer network.Right now, it is an entrenched obstacle to the Tesla-direct-to-sales-model. They will fight it hammer and tongs.I agree with you that Tesla “feels” like something “very special” but they are tiny at 70K units annually v Ford/GMC at 5MM+ units annually with distribution in every state through dealerships which include service, body shops, and used car sales.Frame of reference: MB sold 340K cars in US in 2016 and 28,000 in January 2017. The reason this is important is these are almost purely luxury drivers and low hanging fruit for Tesla.The re-engineering of the manufacturing process is real. Tesla bought a company (Grohmann Engineering) which provided state-of-the-art automation process engineering to a lot of German companies.Tesla decided to focus primarily on Tesla and Herr Grohmann was run off — fired. Tesla didn’t want to share or honor pre-existing contracts. This is playing out in real time as Grohmann got canned less than a week ago.Tesla is trying to grow from 80K cars in 2016 (25K cars in latest quarter) to 500,000 cars which is still miniscule v 5MM cars.In the meantime, they have to master dealer service, body shops, and charging distribution. They have to do these things, but they cannot get permission to go “company owned” for these functions easily.I invite you to go to a MB or a BMW or a Audi or a Porsche or Lexus dealership and take a look at the quality of their service operations. My wife has a Lexus and I am a sucker to take it in because they have a coffee shop nicer than Starbucks x 10.These are extremely smooth operations. You cannot sell a car based on service, but you can create a loyal customer with great service.Then, there is the big difference — electric cars. I can’t drive from ATX to Houston or Dallas and make a round trip in a Tesla. Interstate all the way but can’t make it on a single charge.So, yes, it “feels” like a huge disruption and a thing which should work, but the practical realities seem to suggest it will take 5-7 years to make it happen.Can Tesla survive that long?JLMwww.themusingsofthebigredca…

          2. JLM


    6. Adam Sher

      A company’s ability to withstand the pressure of the 90 day clock depends on the amount of voting and board control the insiders have. Facebook and Amazon are controlled by insiders who can ignore short term noise without risking their jobs.

  13. Val Tsanev

    I totally agree with you Fred. Accountability is enforced when you are public.

  14. Glen Hellman

    Going Public means managing your business to please the speculators, day traders, momentum investors, quant funds who don’t give a crap about growing a business. Unless you want to argue that getting a deal at all costs to make your quarter at the expense of investing in long term growth is a good thing. Going public rarely changes a company culture for the good.

  15. Steve

    Candidly, this sounds like you’re glorifying pain just for the sake of it, and casting a normative moral judgement.”The great companies are the ones that have the guts to bare it all and keep building.”Great companies can also be those who focus on building, without the gratuitous regulatory, administrative, & media overhead of being a pubic company, and who shelter themselves from the vagaries of myopic public equity investors who think in 3-month cycles.Just a thought.

    1. Danielle Maveal

      Agreed, Steve. Agreed.

    2. Anne Libby

      That’s why some great companies avoid outside investors, period.

      1. LE

        Exactly. But then you will own close to 100% of a very small thing and not be able to take the risks that come with using other people’s money. Those risks can then lead to rewards which will give you a much smaller percentage of a much larger thing.

        1. Anne Libby

          Exactly. Either way, it’s live by the sword, die by the sword.

          1. JamesHRH

            Exactly, huge risk profile in those companies.

      2. Matt A. Myers

        I keep wondering if I’ll get lucky and be able to stay bootstrapped – the golden dream.

        1. JamesHRH

          You will still need outside PoV and you would be better off to have an external group to satisfy.Great PrivateCo entrepreneur I know tells tons of good stories, but many of them involve ‘BoD member then says……..and its obvious that is what we should do.’

        2. Anne Libby

          That’s the more common outcome for most businesses.And, go Matt!!!

    3. JamesHRH

      They also tend to be led by a single mandate philosophy, which, if left in place after rapid growth, will threaten the long term viability of the business.Mature compagnies operate from a multi-mandate philosophy, which requires judgement as opposed to intelligence.See: Kalanick, Travis.

  16. Roberto Magnifico

    Am so empathetic with this post as we also went public, back in 2013, for the exact same reasons you mention. But we are investors and the reason for going public in a still somewhat thin and immature market as ours is still to this day in Italy, was exactly to increase awareness to the VC industry as well as brand awareness, on TOP of all those very issues you point out in your post. Not to mention the fact that we want to be as much as “eat our own dog food” personas as possible in the eyes of the very startups we invest in as well as in those of our co-investors. It has turned out to be a key move, in our startup ecosystem, for us.

  17. pointsnfigures

    Being public also gives the company a “currency” which makes it easier to do transactions and partner-or be acquired.

    1. LE

      Good points. Plus the info on a public company that you are acquiring has already been pre-vetted and run through the mill of scrutiny.

  18. LE

    And you look at that and you might say “why would any company want to go public?”Fwiw not something that I ever thought. To me being able to go public is winning the prize in business. From your statement it’s obvious that the new thinking is (specifically with startups) that that is not the case. To me it’s like a rock star selling out a large stadium vs. a small venue. [1]But here is the thing. Being public is about being transparent, accountable, and owning up to the issues and dealing with them.The great companies are the ones that have the guts to bare it all and keep building. Which is why I think being public is a good thing…I know you think more than that. This post (which was obviously driven in part at least by the negative emotion from the news) honestly doesn’t do a good job of given the vast upside of going public. To me the upside of going public is not what you are saying as a reason. It’s like saying that having a heart attack is a good thing because it gets you to lead a healthy lifestyle and pay attention to what you eat.You’ve done this before but might be time for another post regarding the benefits of going public.[1] Which there are greater risks that go with the reward, right?

    1. Richard

      For etsy, there was 3 billion reasons on the table. Pretty good reasons.

  19. JLM

    .Wall Street and Kim Il Dung are similar operations — always spouting off about the impending nuclear catastrophe which often doesn’t happen. The American fleet (the market) shows up on your seashore to keep things on an even keel.Twilio announces a big customer, Uber (12% of revenue, reportedly), is going to be “cutting back” — not pulling the plug, cutting back.So figure they cut their commitment by 5% out of the12%.The stock goes down 30%.This is what folks call a BUYING OPPORTUNITY. Well, the folks who do the maths.It will not bust the company, it will not be a huge change, it is something any company with big customers has to think about, it will come back up when the fleet arrives (meaning the market calls the doctor and says, “Hey, Doc, I have that 4 hour erection. What do I do?””Nothing, wait it out. Buy some Twilio and call me, well, never.”Etsy announces it is changing out its CEO. Stock drops 10%. Yawn! Oh, sorry. Big. Fucking. Deal.You didn’t know Etsy was playing musical chairs in the C suite for a few years? That one’s on you. Sorry.It too will find equilibrium when the USS Carl Vinson is laying up in New York harbor.Public companies are not difficult to run (said the guy who ran one for 12 years), but you have to know CEOs are spending a lot more time on non-cash compensation accounting and assessing the book value of goodwill.The other stuff is just normal stuff. Hire good CEOs, man.[Pro tip: There are those who think chairmen of the boards of public companies should be saying nothing public about their companies. Reg FD is a bit of guidance when in doubt. Freddie is the chairman of Etsy, thinks I. Could be wrong.]I am waiting for the pool guy to get here and bored.Welcome back. I missed me.JLMwww.themusingsofthebigredca…

    1. Rob Larson

      Welcome back!

    2. Salt Shaker

      A strategic Texan would have planned his return on Cinco de Mayo. Bienvenido, JLM!

      1. JLM

        .[Nah, and I am ashamed to admit, I am moving to Savannah, Ga and Wrightsville Beach, NC. Slowly, but for real. Been spending a lot of time there and I decided to live at the beach.][Do not tell anyone. When I put shit in brackets [ xx ], only you and I can see it.]JLMwww.themusingsofthebigredca…

        1. Salt Shaker

          Ah, come on, you’re loathe to admit it…ATX is just too friggin liberal for you. There’s a lot of red in GA and NC (sans ATL and Charlotte). I actually think I lost one of those DJT bets w/ you, btw. You pegged him quite early, although I’m still betting his Presidency, his marriage and possibly both won’t last 4 yrs. (though facades can be quite deceiving.)

          1. JLM

            .Actually, ATX is a perfect mix. I like the liberals. In many things, I am wildly liberal — education as an example — and I love hearing a sound argument. The other day, I had a chat with a prof and he almost convinced me, but the Easter Bunny and Santa had to go to a meeting.Pay up, Saltie.I will bet you on both his Presidency and his wife.I am extremely high on Melania. Did you know she settled her “she was an escort in Milan” lawsuit for $3MM from the paper and $1MM from a blogger?He’s going to keep the vast majority of his promises.JLMwww.themusingsofthebigredca…

          2. sigmaalgebra

            Gee, after the first Republican debate, I wonder what odds I could have gotten betting on Trump to win the WH? Maybe some chump change would have gotten me a new supercharged Corvette? I was plenty convinced he was going to win; IIRC I made that clear enough about then here at AVC. Not betting, I blew it.I agree: His marriage is rock solid, and he will keep nearly all his promises.For his marriage, although I might be hurting the odds I could get on a bet, might think about Melania a little: (A) She’s shy. (B) She’s a bit of her own person. (C) She has enormous respect for her husband. (D) She’s determined to be a fantastically good mother and apparenlty is doing that. (E) Due to pride, respect, etc., long whatever she does in public, she wants to be very high quality stuff. (F) She greatly respects the US and her role as FLOTUS and wants to make sure that whatever she does is A+. E.g., her presentation and behavior during the inauguration, her hosting of the WH Easter Egg Roll, at the visit from China, what she did hosting the children’s medical event, etc.When she moves to the WH full time this summer, likely she will do more official FLOTUS hosting.She’s doing fine.We are really lucky to have her as FLOTUS.Generally, to understand what Trump is doing, just have to set aside 99 44/100% of the MSM coverage — flush it all as deliberately despicable, destructive propaganda, which it is. Then pay attention to Internet, e.g., YouTube and Twitter, material directly from Trump and the Administration. Take it with some grains of salt if you will, but the MSM is no help.Can trust in something, Trump’s intentions: He really does want to leave the US better for his and all kids. And he’s doing it.Hint: The first US female POTUS will be Ivanka! Not too tough to guess that’s planned, right?

        2. Donna Brewington White

          So, you are doing it.I guess you no longer anticipate Texas seceding.Godspeed.

  20. BillMcNeely

    Is the 90 day dash a product of the American mindset of impatience or the world wide market reality?

  21. Jason F

    Not often a VC is Chairman of the Board (like Fred Wilson just became for Etsy)…

  22. sigmaalgebra

    I’ve thought about that a little: There’s a chance my startup will become quite valuable, e.g., have the attention of 50% of US Internet users on average for 30 minutes a week, annual revenue, nearly all pre-tax earnings, of $500 million a year, market capitalization maybe $12 billion (P/E 30). And there’s solid evidence that much more growth in market capitalization should be possible.How to get the $12 billion? Sure: Use some original, powerful, valuable applied math, with some advanced pure/applied math prerequisites, to make ballpark half the US Internet users a lot happier and where the math is difficult for Silicon Valley or the big tech companies to duplicate or equal. Have some additional advantages, not really large, from virality, network effects, lock-in, switching costs, and social connections, style, image, and acceptance. Also have some nice advantages of some uniquely powerful ad targeting with, still, good protection of user privacy. But the simple view is the most important one — make the users happy. Right, it’s all safe for work, actually emphasizes, if you will, traditional family values for people who care about such values.So, at that point, what do I do with the company? Sure, broadly I have two choices, (1) stay private or (2) go public.But, either way, I will want to retire and will have plenty of money to do so. Retire and, to borrow from a Sherlock Holmes movie, “devote my life to the pursuit of abstract science”! I enjoy academic research but want to make the money first and do the research later. For a chaired professorship, I’d rather fund some than pursue one for myself. The times I tried, I found doing high quality applied math research fast, fun, and easy and would like to return to it!For (1) leave my heirs, foundation, whatever, the company. They may grow the company nicely for decades or too soon ruin the company. Risky.For (2) go public, basically sell the company for cash. So, right away have a pile of cash so at least in the short term have lowered risk. The cash can go to heirs, foundation, etc. What would they do with the cash? Hopefully invest it well, and for a simple, first-cut approach buy stock in one or more solid index funds. Again, less risk.So, the issue is the classic trade-off of risk and return that is the idea behind the Sharpe capital asset pricing model (CAPM), diversification, and index funds: So, for (1) keep control of the company in the hands of a few people, put up with the additional risk of, call it, all the eggs in one basket, and hope that long term the people in charge can grow the wealth faster than the index funds or (2) depend on the index funds, lower risk, but maybe also lower returns.I can see why a lot of people would pick (2).I would want to try to see what Bill Gates has done and how he did it in recent years: Apparently, ballpark he sold nearly all his Microsoft stock and, with some super sharp advice, made some large investments that grew especially fast, much faster than Microsoft. So, instead of keeping the company (i.e., Microsoft), he sold the shares in the public company (Microsoft) and found still better places for the cash.Of course, for (1) there’s another standard risk, the story of the American family — “rags to rags in three generations”.So, maybe (A) provide my heirs enough money so that they can do nearly anything but not so much money that they can do nothing and (B) put the rest of the money in a foundation and hope for a really good BoD for the foundation.Yes, I know: Some people say don’t count the chickens before they hatch, but I’d say if do have some really good looking eggs then at least do some first cut planning before they hatch.But have my company do an IPO while I’m still running it? Hmm. For me a big concern is the media: I see the media as a lot of hungry, ignorant, vicious, degenerate, depraved, despicable, destructive, yapping, frothing wild dogs (I’m trying to be nice here) out to bite, rip, tear to shreds, and destroy everything they can find. They do this to get news with shocking headlines and stories that get them eyeballs and ad revenue. A lot of those dogs are really Communist convenient idiots who want a revolution to have their fantasy pure society, see a revolution as “kicking in the rotten door”, and, if the door is not yet rotten enough, then work to make it so. Their news is made-up, cooked-up, stirred-up, gang-up, pile-on, distortions, deliberate out-right lies, often an alternative narrative that they establish consistently over time (e.g., the NYT’s long hysteria about climate change), much like writing a formula fiction novel, and reinforce, gang-up, and pile-on with other newsies (e.g., NYT, WaPo, ABC, CBS, CNN, MSNBC,. NBC).Then in particular, if I did an IPO, the media wild dogs would daily, even hourly, do their best to destroy my company, right, just so that they could get headlines.So, with an IPO, I’d have to have an office working full time fighting packs of media wild newsie dogs out to destroy the company. My company is totally squeaky clean, and there’s no reason to attack it. But the packs of newsies are just wild dogs and need no reasons.In particular, the newsies are ignorant and incompetent, e.g., can’t be clear even at middle school level on percentages and growth rates (“up 11%” — with respect to what, this quarter compared with last quarter, annual rate or not, etc.?), clear on axis labels for graphs, won’t follow even basic high school term paper writing standards for references to primary sources, do shamelessly quote out of context, deliberately misquote, deliberately quote from other media sources that misquoted, give summaries and characterizations intended to be false and misleading, etc. Net, their stuff is garbage. And my company would have to fight that garbage hourly.This view of the newsies and media is not just my fears or imagination but goes way back to an even more bitter denunciation by Jefferson as at http://press-pubs.uchicago….Apparently the situation is simple: People have known how to lie for a long time. By lying, newsies can build stories. Still a lot of the public will pay attention. A lot of harm is done.As a public company, I’d be exposed to those newsie wild dogs but, as a private company, much less so.And, there is, as elsewhere here today, the difference in long term versus short term projects to grow the company. So, as should be the case, suppose the company has some ideas for doing better. So, there’s a project. It can be funded as a current expense or a capital expense. Whatever, quarter by quarter it reduces the after tax earnings. The stock investors don’t want to see that. As a result, it’s common for a company to accomplish such a project simply by buying a small company, calling that an asset on the balance sheet and a done deal. So, really, the public company is throttled in what they can do for innovation and pushed to get most of their innovation just by buying from outside instead of building from inside — bummer that throttles innovation, reduces the collection of trade secret intellectual property, etc.This thinking appears to go back to some image of industry 100+ years ago where super proper, stiff, high collar, finely tailored captains of industry gathered in an elegant, walnut paneled board room, sat in over sized chairs covered in flawless black leather, and quickly made their high level decisions from just a few simple reports and presentations confident that their position and judgment were somehow so good that they were doing about the best possible, “no real work about it”. BS, looks like a case of smug, class-based entitlement, e.g., everyone in the room went to Harvard, Princeton, or Yale, the last time they set foot on the factory floor was at the end of the first ribbon cutting, and they are ready for disruption by some people ready for some bright ideas and hard work.So, generally, stay private, anonymous, out of the public eye, not of interest to the newsie wild dogs, able to do long term planning, etc.One more point: One urge for an investor is to exit and convert to liquidity. Hmm, that’s easy enough to understand. But that’s not just what Buffett has done! He rarely sells companies for cash. Instead, he keeps companies and uses their earnings to buy more companies. He also does some things with insurance companies and options. But he doesn’t just rush to cash (some VCs want to do this to pay off their limited partners who need the cash for payouts for their pension funds or some such).

  23. What?!

    hey fred, your a smart guy. but all of the companies you have invested in and taken public end up shitting themselves. tumblr (written off basically / zombie) lending club (-75%), twitter (-55%), etsy (-60%), twilio (-25%). i mean what the hell man? your a good promotor of shitty private companies that implode upon going public. dont sugar coat it.

  24. Donna Brewington White

    The great companies are the ones that have the guts to bare it all and keep building.That is so quotable. And tweetable.