Why you should go public ASAP

Shamir Karkal
The Startup
Published in
4 min readMay 28, 2019

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I recently tweeted about the TransferWise secondary sale.

My own belief is that as a startup founder, you should go public as soon as reasonably possible. There are a bunch of compliance and regulatory hurdles to cross, which makes it unpractical for any early to mid-stage company. But once you get above $100M in revenue, you really should be actively planning on an IPO. Get on the path to profitability, build some reporting muscle, get your cap table in order and hire an underwriter (or do a direct listing). Here is why :

Late stage markets are fickle

There has been a boom in late stage investing since 2010. Companies can afford to stay private longer because they can raise large $100M+ rounds of financing in the private markets. As recently as 10 years ago, this was unheard of — now its routine.

“Round sizes of > $100 million or more now account for 47% of all VC dollars (62% if you count rounds > $50 million)”

Mark Suster

But late stage investors are mostly newcomers to the VC business. Many of them are public market investors who began to invest in late stage companies in the last 5 years. This coincides with one of the longest recession-free eras for the global economy. It is easy to be blasé about the risks of private market investing when everything is going up and to the right. When the next global recession hits, many of these investors will flee back to the safety and liquidity of public markets. Others will pull in their horns and reduce exposure to what they suddenly remember is an illiquid and opaque asset class — private company stock. Already, the less than stellar IPOs of Uber and Lyft have begun to hit other ride-sharing companies, and even gig economy companies in general.

Staying private is a shield for bad behavior

All too often, staying private is a shield to hide bad behavior. The most common form of this is financial statements that look great, but hide a lot of underlying problems. Late stage investors conduct due diligence, but the ones who don’t invest just walk away. In the public markets, there are a lot more folks scrutinizing any statement, and it’s a lot harder to hide flaws. And there is a whole army of short-sellers who specialize in finding hidden flaws in public companies and taking a negative position on their stock.

Even worse is when private companies build toxic cultures. That never ends well, but staying private can allow companies to keep it hidden for a long time.

The end result is that public companies are usually much better run, both financially and organizationally, than their private counterparts.

Public markets are always open

The only constant in life is change. Markets go up and down, and can pivot rapidly from irrational exuberance to inchoate fear. Yet the public markets are always open, and you can always raise money there, even if the price is very unattractive. Ben Horowitz famously raised money for Loudcloud and spent it aggressively to destroy the competition in the depths of the dot com bust. That would not have been possible for a private company when the private markets had basically dried up.

Now there are always exceptions to every rule. If you are a late stage company that is well-run, profitable, and has a big cash hoard, you could effectively stay private forever. Levi’s choose to stay private for 165 years, and then had a very successful IPO in 2019. And you can always return capital to early investors via secondaries, stock buybacks, or even by paying a dividend. But if thats the case, why not do that all of that in the public markets? If you can swim so well, what is keeping you from jumping into the deep end?

About the author

Shamir Karkal is the co-founder and CEO of Sila. A software engineer turned finance and banking expert, Shamir previously co-founded Simple and headed the Open Platform at BBVA. As a serial entrepreneur and fintech investor, he’s deeply involved in building the fintech ecosystem and proud to have been an angel investor in TransferWise, EarnUp, MPOWER Financing, Fabric Insurance, and others. He is also a volunteer at iSpirt.

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Shamir Karkal
The Startup

Co-founder and CEO of @SilaMoney. Co-founder of @simple. Investor in @realty_mogul, @earnup, @transferwise and others.