Private Startups “Crush It.” Public Companies Get Crushed

Illustration by Ryan Inzana

Yesterday Fred Wilson had some harsh words for Uber CEO Travis Kalnick. By not taking Uber public, Uber is wimping out, Wilson said. “Take the goddamn company public.”

Looking at the performance of tech stocks amid earnings season, and it’s easy to see why Kalanick isn’t in a hurry. It’s ugly out there. GoPro (GPRO) lowered its guidance by $130 million this quarter, and the company’s stock, as my colleague Adam Lashinsky pointed out this morning, is a single-digit stock now, down from more than $65 this summer. LinkedIn (LNKD) beat its quarterly expectations and its shares tanked 33%. Tableau (DATA) beat its expectations, and yet shares plunged by 50% because of a tax issue. Unless you’re a FANG (Facebook Amazon Netflix Google), investors are ruthlessly unforgiving.

We don’t know for sure how well Uber is doing, but leaks of the company’s financials show it spending like there’s no tomorrow. But because Uber still private, investors don’t seem to care. Yesterday the New York Times reported that a 290-page offering document for a Morgan Stanley fund full of Uber stock offers no financial details to investors. They “are effectively handing over their money with their eyes closed,” according to the Times. And happily! Investors (primarily wealthy individuals) have poured $500 million into the fund.

As I wrote last year, at least in the first tech bubble, we knew how much money the startups were burning. Today’s information scarcity means each new shred of bad news makes us rightly wonder which other startups are hiding dysfunction.

The lack of transparency is a problem for startup investors, and it’s a problem for the companies doing business with startups. But it’s really a problem for startup employees. They often don’t know much more than we do about the health of the companies they work for. Or worse, their CEOs sell them on the gospel of “crushing it” even as the wheels fall off.

Some startups, like Pinterest and Gusto, are changing that trend with more internal transparency, as Dan outlined earlier this week. But the sheer volume of hyped-up noise about startup riches (which I admit to being guilty of) drowns out any measured warnings about risk.

That’s why it’s valuable to publish information like the burn rates of startups that employ thousands of people. So if you know which ones are burning more than $3 million a month, feel free to let us know.

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