Most businesses in technology are nothing like the VC-funded, exit-oriented, and/or hyper-growth culture would have you think. Yet it seems like the glitz of a great IPO or being able to shell out for a $200 million annual corporate event blinds many to the reality of most businesses.
I have wondered how much of this naïveté contributes to the failure rate of technology startups.
I’m on my second business and I intend for it to be my last, though time will tell. The key thing I’ve learned is that hyper-growth, IPOs, and VCs aren’t really good for anyone other than the equity holders. Once you start selling ownership in your business, your customers are no longer your first North Star.
If the general understanding was that the founders (well, board) weren't chasing an acquisition or IPO, this might be a good deal for employees. Of course, if the company is VC-backed (and the founders don't have majority control anymore), the VCs probably wouldn't go for this sort of thing.
I do actually wonder if the current trend of consolidation is driven in part by the standard VC-backed startup formula. Getting acquired is usually a lot easier than going public. Instead of startups fueling long-term competition, they just end up getting gobbled up by larger players most of the time, fueling consolidation and monopolistic behavior.
And as someone who went through an acquisition exit in a just-shy-of-unicorn startup by a very big dog, yes, everyone's/VC's aversion to IPOs is definitely making it easier for said big dog companies to acquire people who in the past would have been shoe-ins for excellent IPOs.
IPOs and huge sales far above the liquidation preference is the only way any of the employees would see any of that money.
Founders and employees would be totally OK with staying private, if the board would ever permit issuing a dividend. That's the "normal" way to have an "exit" (i.e. return profits to shareholders) without a public offering. The purpose of delaying issuing a dividend is to reinvest profits / additional fundraising for growth, but that growth should still result in a dividend in the future, just a larger one if the investment in growth succeeds.
Instead, founders and employees are encouraged to look forward to an IPO precisely because somehow we've come to believe that it's sinful for a company to issue a dividend, as if doing so means giving up on the idea that further growth is possible, when really it's only an acknowledgement of the fact that (a) there's a healthy rate of growth, (b) that healthy rate of growth costs $X, (c) if the company has $Y cash >> $X growth cost, then the healthy thing to do is to issue a dividend (so that shareholders can invest the excess into companies that are currently better recipients), rather than attempting to force growth faster than the company can support.