Over the past couple of weeks I’ve heard the phrase “private IPO” a lot, referring to the later-stage private financing rounds that often include crossover investors. An alternative phrase offered up in the recent Andreessen Horowitz presentation is “quasi IPO,” which it defined as a financing of $40 million or more.
I know it’s tough to be a stickler for venture semantics when I hold dear to “unicorn,” but we should be clear that there is no such thing as a private IPO. And I’m not just talking about the basic contradiction of modifying an acronym for public with the word private. Instead, I mean that these sorts of financings only satisfy two of an IPO’s four main functions:
- Raise money. Yup, it does that.
- Give company added credibility and air of stability. It often does that, so let’s check off this box.
- Create liquidity for early investors and employees. Not usually.
- Create a public currency that can be used to make acquisitions and better access the capital markets. Nope.
The only thing that’s really like an IPO is… well, an IPO. The private financing markets may be changing for hot tech companies, but they haven’t changed that basic truth.
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