It used to be that you could find an IPO underwriter after 100M in revenue and growing YoY above others in the competitive basket.
I’m not sure that’s true anymore, I think you still need the revenue, but just need attention. everything else is just whatever because you can’t predict 10 year outcomes for any business at this point with any level of confidence, and there’s nothing to compare it to other than extremely different businesses.
Ultimately it’s more of the same goal with differing levers:
Offload a massive illiquid investment onto the public so that investors make their fund
Make sure it can tread water long enough for people to forget about it so it can go through the long and slow enshittification period
After all the prime investors have liquidated and some cooling period, risk of lawsuits from activist investors drops significantly, they can ratchet up the margins, do a few years of layoffs to pump the price.
Then everyone involved is back to where they started, only the top 100 richest people put even more distance between themselves and everyone else so they can now invest in radical life extension or whatever
For folks curious, In terms of IPO, rule of 40 was common when I was involved in thinking about IPOs. https://www.mckinsey.com/industries/technology-media-and-tel...
Depends how you look at it but at DO we shot for 50, ended around 55. (25 % growth + 30 % profitability)
> "Offload a massive illiquid investment onto the public so that investors make their fund"
This is what it looks like to me. Crazy growth numbers to bump the valuation and public interest, go public, gradually let the company shift into irrelevancy after major owners have cashed out.
The smoke and mirrors part here is that no one except the AI research community knows what the ML/AI capabilities will look like in 5 years. What that means is that the general public is probably going to eat up this IPO. Probably a better move to hedge by buying Microsoft, but whatevs.
> Offload a massive illiquid investment onto the public so that investors make their fund
Anyone with OpenAI stock can do this in the private markets right now to the tune of hundreds of millions of dollars. Not billions. But I'm not convinced liquidity--versus appreciation, for investors, and access to capital, for the company--is the primary motivation for going public.
A ton of regulation happened after 2008/09. So to even become a public entity it’s a ton of effort and expense. And scrutiny. Not saying the laws are bad (but overdone) but the side effect is that small companies with upside don’t go to the public market now. Among other reasons like better developed VC outlets. That were formed because of the regulations.
I agree with you and I hope you are right.
>Offload a massive illiquid investment onto the public
Because this state seems like a very solvable problem: All you have to is not buy it
> Because this state seems like a very solvable problem: All you have to is not buy it
Your index fund will buy them.
ETFs like VOO will buy it eventually.
It started me wondering if theres an ETF that explicitly avoids the top 20 companies
My gut instinct is that this would be a hugely underperforming investment strategy on both an absolute and risk adjusted basis. I would welcome empirical evidence contradicting my gut.
There's SPXT (S&P 500 excluding tech sector), +79% in 5y, vs full S&P +110% in 5y.
Obviously, in tech/AI bull market it can't be not underperforming.
I'd rather cross to international (including. US) than to that, for a less performing but more Black Swan proof fund.
Couldn't you set up some options to simulate that?
XMGA