The creation myth is familiar: founders in a garage, a seed check and then (many years, and many rounds later) an IPO that serves as a liquidity event for insiders. In this story, the public markets are where the startup goes to retire.

But this is historically illiterate. went public in 1997, three years after founding, at a market cap of $438 million. It had $15.7 million in revenue. Nearly everything Amazon would become (the marketplace, , the logistics empire) was built after it became a public company.

The same is true of , and , the latter of which went public at under $1 billion and has since become the most valuable company on Earth.

In the 1990s, the median tech company went public when it was 4 to 7 years old. Public investors didn鈥檛 buy the tail-end of innovation 鈥� they funded the vast majority of it.

It remains true today. Just look at the 鈥淢agnificent 7.鈥�

Amazon vs. WeWork

When the dot-com bubble burst, Amazon鈥檚 stock collapsed to single digits. That crisis forced to restructure the cash conversion cycle, close distribution centers and lay off 15% of staff. Amazon posted its first profitable quarter in Q4 2001. The public market鈥檚 ruthlessness was the forge that hardened the business model.

Now compare this to what the 鈥淧rivate-for-Longer鈥� era has produced. By 2024, the median VC-backed company , a full decade later than many 1990s counterparts.

Shielded from quarterly accountability, short sellers and skeptical analysts, companies like accumulated $47 billion valuations while hiding behind metrics like 鈥淐ommunity Adjusted EBITDA.鈥� When WeWork finally tried to list, the market rejected it instantly. But by then, billions had been wasted. Private market opacity had delayed diagnosis until the rot was terminal.

Discipline creates strength

The data is damning across the board. The 2010鈥�2020 cohort of VC-backed IPOs generated a return relative to the S&P 500. In 2021, only 25% of IPOs were profitable.

went public at a 77% discount to its 2021 valuation. went bankrupt. The Renaissance IPO ETF fell over 50% from its peak.

Meanwhile, 鈥檚 research shows that of a company鈥檚 lifetime value creation now occurs in private markets, accessible only to institutional investors. The returns to innovation have been privatized while the risks have been socialized.

The central paradox is that more private funding has not produced more innovation, it has simply . Abundant capital allowed 鈥渂litzscaling,鈥� promoting growth over efficiency, far longer than the market would naturally tolerate. In the 1990s, a company could burn cash for three or four years before facing discipline. Today, it鈥檚 well over a decade and the result is companies that eventually go public with .

None of this means venture capital is unimportant. Early-stage risk absorption remains vital. But innovation is a lifecycle, and the lifecycle includes a public chapter that is not optional. What matters is the handoff, the transition from private incubation to public maturation, where ideas are tested, funded and held accountable by the broadest possible base of investors. The most consequential companies in technology history made that handoff early. The generation that delayed it has delivered the worst returns and the most spectacular failures.

If innovation is the goal, the handoff matters. And we have been fumbling it.

, a frequent guest author for 附近上门 News, is the research lead at , a platform that allows VCs and angel syndicates to raise and deploy capital globally.

Related reading:

• The Great 鈥楢I Bubble鈥� Debate
• Why Raising Too Much Funding Is Often Fatal
• Should VCs Invest In 鈥楯ockeys鈥� Or 鈥楬orses鈥�?

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