I think that's what the grandparent commenter meant. Early startups with large growth opportunity used to be abundant on the stock market. But now the burden is too great, so only larger companies can IPO. I even hear phases like "dump it on the public market" - the public market is where you go today after you have milked most of the major opportunity out already.

This. The public mkt used be the source of capital for companies like Facebook. Now it’s all private until most of the growth juice is squeezed out and now the public mkt is a liquidity event for the private investors. If/when they want to...

Facebook is up almost 500% from its IPO price, so even the very smart private equity and venture folks can misjudge when an opportunity has been completely milked.

Another reason to go public is because the SEC forces companies with 2000 stock owners (used to be 500 pre-2012) to file public disclosure documents similar to being public, so companies typically go public at that point. I’ve heard that some work around this limit by issuing IOUs indexed to the stock price.

https://www.investopedia.com/terms/5/500-shareholder-thresho...

You also can give RSUs, which don't actually become owned by the recipient until the company is acquired or become public. No fancy IOUs required. This IOU is denominated in stock units instead of a cash price.

You’re in agreement with gp- he’s saying that an IPO used to be an opportunity like facebook, but now they just stay private like Uber until they believe most of the value is locked in.

Isn't that because there a more wealthy individuals and many of them are connected to the same network?

Just the same, pub mrkts used to be about companies and investing. Now they're just datasets to be milked and manipulated by quants, automated trading, etc.

Perhaps the better conclusion of the NYT article should have been that these markets no longer carry the economic significance they once did?

OTOH, a lot of companies used to go public that had no business doing so. We went through a period where a lot of normal folks lost big portions of their retirement savings betting on public companies that really shouldn't have been in public markets. Yes, early-stage startups have the potential to return 100x, but they've also got the potential to lose 100%. That's the reason why we have the rules around qualified investors...they're people who are supposed to be in a position where losing their entire investment doesn't cause the kind of impact we were seeing when so many dotcom IPOs failed.

Yes, so punish the 98% who invest responsibly because 2% go ape? I know plenty of people who lost their shirts investing in real estate in the 00's because supposedly that's a "safe" investment that retail investors can be trusted with since there's so many checks and balances. Gimme a break. All investments are risky. Public companies can go bankrupt. Real estate markets can crash. Shit hits the fan. People are either adults and take responsibility for their financial decisions or they're not. The legal distinction between who can buy what assets based on net worth is absolutely ridiculous.

I'm not saying I agree with the current restrictions on accredited investors, but there should be a middle ground between what we have now and what we had back when the dotcoms collapsed the market. Back then, there were stocks so risky they'd make today's ICO investors nervous if they'd been presented honestly. But they were sold as being relatively safe in a way that allowed early-stage investors to foist their failed bets on to the public.

I witnessed first-hand a situation where executives engaged in outright fraud in an effort to kick the can far enough so that the VCs and execs could cash out. The aftermath of that fraud was two scapegoats who were sentenced to 18 months each and had to pay fines of less than 10% of the profit they made from their crime. If you're an individual who invested in the company and lost all your money, then fine...I can see the personal responsibility angle. But most of the losses were mutual funds and pensions where the losses were felt by people who had no hand in choosing that investment. Instead, that was financial professionals and the perverse incentives they're given that push them to seek outsized returns.

There's a very good possibility that we're in an over-regulated state at the moment, but it's important to remember that in the complete absence of regulation, the public gets fleeced. The focus should be on finding the right regulation rather than vilifying the general concept of regulation.

Right, so for one, perhaps requiring a certification course for people to become accredited investors might be a much fairer alternative. The course could cover risks, go over the history of scams, teach people fundamentals of stock valuations, etc. And with this accreditation then one can go invest their own money on startups. That's a reasonable regulation that anyone can satisfy if they feel compelled to.

Nanny state is killing public markets with regulation. The regulatory burden goes only one way- up and up. Only the largest established companies are semi-comfortable with this regime: it sets a barrier to entry. After all, they helped to lobby these regulations. That's all.

Woah woah are you recommending personal responsibility here? Careful.. ;)

> small companies aren’t going public because of the much larger regulatory burden or cost

Do you mean, larger than staying private? Or larger than it used to be? Regarding either, I would guess that regulatory costs were much higher in the 1970s, before modern 'deregulation' and when the concept of government involvement in the economy was different, yet small companies' participation in the market was much higher then, according to the article:

* In 1975, 61.5 percent of publicly traded firms had assets worth less than $100 million, using inflation-adjusted 2015 dollars. But by 2015, that proportion had dropped to only 22.6 percent.

Also, are you aware of any evidence for it? (For other readers, the parent's link addresses another issue, the change in cost of small trades.) Unfortunately, regulation and its costs are such a politicized issue that I have a hard time finding reliable data (or any data).

EDIT: For a counterpoint, consider that regulation makes markets more attractive. For example, nobody would want to participate in a completely unregulated market, where theft and fraud were commonplace. Regulation, when implemented properly, makes markets safe for participants, protecting their investments.

I have no hard evidence one way or another, but I do remember that the introduction of Sarbanes-Oxley (2002) was a very big deal in terms of IT spending for years. SOX came as a reaction to Enron and WorldCom.

I don't think this is necessarily a question of whether regulation as such is good or bad. It seems intuitively plausible to me that regulation like SOX can be both beneficial in terms of trust in the markets and a deterrent for smaller companies to go public.

> It seems intuitively plausible to me that regulation like SOX can be both beneficial in terms of trust in the markets and a deterrent for smaller companies to go public.

While I agree, I think the problem here is that many, many things are intuitively plausible. Maybe market fraud is increased and the markets are less safe for small businesses, or maybe policies or custom or collusion have cemented big players who have less interest in small companies. We need data and reason to sort the wheat from the chaff.

Our intuitions suck. If they were good, we would have had the right physics in 1,000 BCE instead of 1900 CE. (Not my line, but a good one.)

Not your original point, but as a physicist, I chuckle at the proposition that we had "the right physics" in 1900 CE. The turn of the century marks the discovery of quantum physics and relativity, demonstrating that we're not even close to "the right physics".

Yeah, I thought for about 15 seconds before choosing that date, but then decided it wasn't too important. Perhaps the better way to express it is, 'when did we not have the wrong physics'? When did we jettison alchemy and the rest forever in favor of modern science?

I'd guess earlier than 1900, but I don't know. And of course, there are many gray areas.

> When did we jettison alchemy and the rest forever in favor of modern science?

Wake me up when people stop believing in homeopathy.

I agree. Unfortunately it is extremely difficult to measure the effects of any particular regulation. It's a one-off, under very specific historical circumstances and it interacts with a huge number of equally unrepeatable events.

I don't envy economists. No double-blind lab trials here. Even if we had Putnams Twin Earth our experiments would probably fail for some weird semantic reason :)