Going public vs. Venture Capital: What's better for Startups?

[seomatic]

So I was researching stocks this week and realized nearly all of them (99.9%) are vastly overvalued (in my opinion). That made me think: Why not sell stocks instead of buying them?
Let's say I put 100k in dividend stocks that will make me 5k per year ... boring.
But if I put 100k in my own company and go public I'm sure it will be valued much higher than 100k.

I've literally seen companies with no revenue and just an idea that reached 10+ million USD valuations.
In my country it's literally super cheap to go public. It will cost me under 10k and I'm fulfilling all requirements.

Is it really that easy to become a deca-millionaire or am I overlooking something here? I know that it's just paper money and I have to deliver something in the end.
However I know how to run a company and make profits and if I can raise let's say 10 million I will be able to hire staff and make profits which will then increase valuation again.

It seems like a smart way to profit from inflation, what do you think?

 

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[Windward]

Go for it!

 

[seomatic]

Go for it!

Thanks that's exactly the answer I needed! You can't imagine how many good opportunities I missed because I thought: It can't be that easy just to see someone else profiting from the very thing I didn't do.

 

[seomatic]

I'm wondering why people even bother with VC nowadays. To me that sounds like a nightmare, it's much better to have smaller investors in the company without any decision-making power.
So plan for now is to offer 10% and keep 90% of the company then perhaps raise more capital at higher valuation.

 

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[Antifragile]

Not as easy or as good as you think.

1. Raising money to meet the minimum requirements is hard. Your investment banker better believe in you to help you raise enough.
2. The valuations are not always higher than VCs. There is art and science to making your PubCo stock go up. Regular dividends etc.
3. Just because you are listed, doesn’t mean you are liquid. Meaning that you could have a PubCo and not be able to get any cash out of it. No buyers for your stock.
4. heard of short sellers? You run the risk of having one of them target your company and you might have a hell of time fighting them off.

the list could go on… if you’ve never done it, never talked to anyone who’s done it … you are in for a few big surprises. And listening to a random internet stranger telling you “go for it” … who doesn’t give a shit if you win or lose, isn’t a good idea.

do more research. A lot more research on public entities.

And remember MJs books? What does E stand for in CENTS? good luck.

 

[seomatic]

Not as easy or as good as you think.

1. Raising money to meet the minimum requirements is hard. Your investment banker better believe in you to help you raise enough.
2. The valuations are not always higher than VCs. There is art and science to making your PubCo stock go up. Regular dividends etc.
3. Just because you are listed, doesn’t mean you are liquid. Meaning that you could have a PubCo and not be able to get any cash out of it. No buyers for your stock.
4. heard of short sellers? You run the risk of having one of them target your company and you might have a hell of time fighting them off.

the list could go on… if you’ve never done it, never talked to anyone who’s done it … you are in for a few big surprises. And listening to a random internet stranger telling you “go for it” … who doesn’t give a shit if you win or lose, isn’t a good idea.

do more research. A lot more research on public entities.

And remember MJs books? What does E stand for in CENTS? good luck.

Alright so how exactly can I find people who have actually done it. That seems like the hardest part because those people are hard to find and don't have time to talk to a nobody. To be honest that's my intention with this thread to find someone who has already done it and I'm open to pay for good advice or compensate in other forms.

1. There are literally no minimum requirements in my country. It's a small place with just a handful of public companies. So I believe they just want to promote it and make it as easy as possible.
2. Ok sure that makes sense. I guess it's all about marketing to shareholders/ Investor Relations. I will hire an expert for that.
3. Good point, I've seen a few companies like that. It will be my priority to have good IR/PR. However we are in a pretty hyped sector so I assume it will be easy to generate public interest.
4. Yes, I've done it myself. However this will only be a risk if we have already a successful IPO, right? New level = new problems. I'm open for it.

What is the worst case? I will lose my capital and getting sued if legal/compliance is off. I'm ready to accept that risk because the upside is expected to be much much bigger.

 

[seomatic]

Ok, found some people who might be able to help me:

Clarity — On Demand Business Advice

Make faster & better decisions to grow your business. Clarity is your lifeline that instantly connects you with battle-tested advice from entrepreneurs. Find and schedule a call in minutes.

clarity.fm

I will do my homework next week

 

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[Deleted85763]

So I was researching stocks this week and realized nearly all of them (99.9%) are vastly overvalued (in my opinion). That made me think: Why not sell stocks instead of buying them?
Let's say I put 100k in dividend stocks that will make me 5k per year ... boring.
But if I put 100k in my own company and go public I'm sure it will be valued much higher than 100k.

I've literally seen companies with no revenue and just an idea that reached 10+ million USD valuations.
In my country it's literally super cheap to go public. It will cost me under 10k and I'm fulfilling all requirements.

Is it really that easy to become a deca-millionaire or am I overlooking something here? I know that it's just paper money and I have to deliver something in the end.
However I know how to run a company and make profits and if I can raise let's say 10 million I will be able to hire staff and make profits which will then increase valuation again.

It seems like a smart way to profit from inflation, what do you think?

What country is this? Maybe anyone can "go public" but for a stock holder (you) to make money anywhere others must believe that by investing in the IPO or secondary market they will have a return. The company has to show either profits or a solid potential for future profits.

You know how to run a company? Then just do it and there's no reason to go public. Why would you want to give anyone else any control? I think you're overlooking the fact that while becoming rich is very possible it's extremely difficult and typically takes a long time period, as in years.

 

[seomatic]

What country is this? Maybe anyone can "go public" but for a stock holder (you) to make money anywhere others must believe that by investing in the IPO or secondary market they will have a return. The company has to show either profits or a solid potential for future profits.

You know how to run a company? Then just do it and there's no reason to go public. Why would you want to give anyone else any control? I think you're overlooking the fact that while becoming rich is very possible it's extremely difficult and typically takes a long time period, as in years.

Yes, it's selling ... to investors instead of customers. It's all about what people believe in the future will happen. Now the good news is that we are in a very fast-growing market that is highly hyped up already but there are only a few companies public. So I assume there is quite a good demand for new companies and a good change of strong valuation.

I'm running the company already and the revenue is growing quickly. I'm not going to give up the majority of the company, only 10-20% max. and raising capital might be smart to grow faster at this stage. I've learned that for startups it comes all down to growth and revenue not so much profits. (in the growing phase)

That's the point: I want to shorten the years it takes. Like why wait 10 years and go then public? Doesn't make sense to me. Even @MJ DeMarco wrote about IPO as a legit liquidation event, but why wait 10+ years?

I believe there is a gap in the market. All the tech IPOs are in the late stages of growth. So small investors can see a company going from 40 billion to 100 billion let's say. But the majority of upside happened before when the VCs invested. It is highly unfair that small investors can't invest in early stages.

 

[seomatic]

Another factor is diversification: Entrepreneurs who have 100% of their net worth in one business are highly at risk. After all every business has a chance to fail and most startups do fail. I would be much more at ease with a 80/20 approach where I have 20% of my net worth in stable dividend stocks for example so my expenses are covered even if the company fails.

I've done some basic evaluation based on Nasdaq average ratios and came up with 500k. So I will wait till it reaches >1 million and build my track record. If all goes well I will work on going public in 2022.

(I know that my company is not comparable with a nasdaq company, it's just to have a rough estimation)

 

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[Johnny boy]

Yes you are 1000% overlooking something.

No one is going to give you money for nothing. You don't have a shred of reputation, any business, a plan, revenue, customers, profit, assets, an idea, etc.

When we start out, we dream big and think it will be straightforward because that's what we WISH it was like.

The MARKET will slap its hairy balls on your face as it teabags your dreams and you will be forced to go back to the drawing board for a theoretically limitless number of times until you realize you must either provide value, or trick people if you are going to get rich. And only one of those is a good long-term strategy.

 

[seomatic]

Yes you are 1000% overlooking something.

No one is going to give you money for nothing. You don't have a shred of reputation, any business, a plan, revenue, customers, profit, assets, an idea, etc.

When we start out, we dream big and think it will be straightforward because that's what we WISH it was like.

The MARKET will slap its hairy balls on your face as it teabags your dreams and you will be forced to go back to the drawing board for a theoretically limitless number of times until you realize you must either provide value, or trick people if you are going to get rich. And only one of those is a good long-term strategy.

And what exactly?

I'm not asking for money for nothing in return. But you can't deny that most stocks have crazy valuations. Gamestop for example? Like that makes no sense. If we look at P/E, P/S ratios they are going up and up and that's just because money is flooding the markets not because of good fundamentals.

Like I said I am providing value, I am running a company with profits and I just want to grow and go public.

 

[Private Witt]

Ok, found some people who might be able to help me:

Clarity — On Demand Business Advice

Make faster & better decisions to grow your business. Clarity is your lifeline that instantly connects you with battle-tested advice from entrepreneurs. Find and schedule a call in minutes.

clarity.fm

I will do my homework next week

Thank you for this link, been looking for something like this.

 

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[Kid]

Smells like Boiler Room Operations.

You're just reinventing a centuries old scam.

Read up.

 

[Deleted85763]

And what exactly?

I'm not asking for money for nothing in return. But you can't deny that most stocks have crazy valuations. Gamestop for example? Like that makes no sense. If we look at P/E, P/S ratios they are going up and up and that's just because money is flooding the markets not because of good fundamentals.

Like I said I am providing value, I am running a company with profits and I just want to grow and go public.

Going public is a for sure a major way people earn fortunes. That is for the owners and professionals involved in the process. You may want to do it. if you can.

I had a family member that was an executive in a small public company and they said the hassles were unbelievable. They would get telephone calls from little old ladies who were shareholders demanding this and that. That family member made a point of telling me: If you start a business don't ever have partners. That includes shareholders. I whole heartily agree.

 

[Johnny boy]

And what exactly?

I'm not asking for money for nothing in return. But you can't deny that most stocks have crazy valuations. Gamestop for example? Like that makes no sense. If we look at P/E, P/S ratios they are going up and up and that's just because money is flooding the markets not because of good fundamentals.

Like I said I am providing value, I am running a company with profits and I just want to grow and go public.

what's your company then?

 

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[Hai]

Yes, it's selling ... to investors instead of customers. It's all about what people believe in the future will happen. Now the good news is that we are in a very fast-growing market that is highly hyped up already but there are only a few companies public. So I assume there is quite a good demand for new companies and a good change of strong valuation.

I'm running the company already and the revenue is growing quickly. I'm not going to give up the majority of the company, only 10-20% max. and raising capital might be smart to grow faster at this stage. I've learned that for startups it comes all down to growth and revenue not so much profits. (in the growing phase)

That's the point: I want to shorten the years it takes. Like why wait 10 years and go then public? Doesn't make sense to me. Even @MJ DeMarco wrote about IPO as a legit liquidation event, but why wait 10+ years?

I believe there is a gap in the market. All the tech IPOs are in the late stages of growth. So small investors can see a company going from 40 billion to 100 billion let's say. But the majority of upside happened before when the VCs invested. It is highly unfair that small investors can't invest in early stages.

Sorry bro, you need market makers. Without them your stock will just approach zero.

 

[seomatic]

Here is an example of what I mean:
NerdWallet is going public tomorrow aiming at a 5 billion valuation. (other sources say 1 billion but still a lot)
They raised already 170 million in the past.
So they should pull big numbers right?
False, they made $5 million last year and lost 27 million so far this year.
What are they doing? It's basically an affiliate site that gets organic search traffic.
I built sites like that 10 years ago. Little did I knew that you can do an IPO at 1000 P/E ratio.
Am I the only one seeing how crazy it is?

NerdWallet S-1 breakdown: Revenues grow alongside marketing dollars | PitchBook

The IPO filing shows personal finance company NerdWallet's 32.3% year-over-year revenue growth wasn't free from rising costs.

pitchbook.com

Oh and Allbirds went public today and is currently up 100 (!!!) %.