[financedfuture]

Regarding unicorns (> U$1 billion valuation), the U.S should implement certain regulations.

These startups have market caps that are larger than thousands of public companies that go through several laws and openly disclosure their financial information.

Not only does this lack information hurt shareholders that are not "part of the club", but also stakeholders that rely on the company in other matters.

http://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2674420

"Regulation of unicorns should recognize that outsized power."

[AlexC04]

I'm not actually sure I agree with this.

Consider that the people & companies investing in pre-IPO U$1B companies are extreme expert investors. They take the risk on.

Now if we're talking about post IPO, then actual financial regulations kick in and market-traders are afforded the protections that they have now (which is still sometimes significant)

Imposing additional regs on a 'privately held' company simply because they accepted enough money to give them a U$1B valuation punishes them for growth.

Additionally, valuations are sometimes voodoo calculations for example (and someone else can check my math) but is someone gave me $1 for 1/10,000,000 of my company, wouldn't that be a billion dollar valuation?

Obviously not a credible one - but - where's the line? $1M for 1/1000? It's still not a billion real dollars.

If you look at linkedin's valuation it's based on current potential for future revenue. But revenue that is like 10 or 20 years in the future. (reference: my foggy recollection of Peter Thiel's lecture in Sam Altman's startup school)

Maybe I'm confused as to how valuations actually work.

[financedfuture]

Sure, valuations are "tricky", but you could still impose regulations on the amount of invested capital (e.g. only regulate after >U$200M is invested).

Also, stating that `U$1B companies are extreme expert investors` is certainly an overstatement. What often happens is not even reliant on expertise or due diligence, but networks and insider "games".

[st3v3r]

"Consider that the people & companies investing in pre-IPO U$1B companies are extreme expert investors"

And regular employees getting paid in options.

"Imposing additional regs on a 'privately held' company simply because they accepted enough money to give them a U$1B valuation punishes them for growth."

No, it doesn't. It shows an acceptance of reality.

[AlexC04]

> And regular employees getting paid in options.

Ahhh... That makes more sense to me.

> No, it doesn't. It shows an acceptance of reality.

Fair point. Consider my mind swayed.

I'm not sure valuation is the right meter stick, but as another point in the thread, total $$ raised might be closer to the right answer.

There is probably something there.

[maxerickson]

It wouldn't be to protect just the sophisticated investors but also stakeholders that rely on the company in other matters.

How to set the bar would be an issue.

[josu]

Enron was a public company, Lehman was a public company in the financial sector (even more heavily regulated), Volkswagen is a public company...

I don't think that regulation would fix anything. And as some people have already mentioned, AirBnB or Uber, have blatantly broke the law and they keep growing and breaking even more laws in various countries.

[financedfuture]

These are just anecdotal examples. Hundreds of unmentioned public companies have faced hurtful consequences that unicorns didn't have to worry about.

In the end, what's urgent isn't regulation on their specific industries, but on their practices and obligations as private companies with a massive market capitalization.

[josu]

>These are just anecdotal examples.

You could say the same about Zenefits.

[st3v3r]

The thing with regulation is that you have to fund the agencies that enforce them. If you keep with the Republican, "free market! Anti-regulation" thing of defunding these regulatory agencies, then of course they're going to be flaunted.

[peter303]

A third of the 173 unicorns in Fortunes 2/1/16 list are Chinese. I only recognize a few of the big name ones. If you thing the US has accounting and valuation issues, wait for the Chinese unicorns to pan out.