[refurb]

The biggest reason for not going public is because you'll get a low valuation. The public markets aren't much for venture investing.

If you don't want to dilute the hell out of existing shareholders, you'll want a high IPO price. You get that by moving the company as far forward on venture cash as you can.

If you take a look at the biotech industry, IPOing too early can result in not raising enough for your cash needs, so you offer more shares, diluting your existing stockholders.

[jacquesm]

> The public markets aren't much for venture investing.

The public markets definitely are for venture investing that was their origin and still is a main function today.

However it is not rare for founders and early investors to cash out during or shortly after an IPO, typically after a hold-back period called a lock-in.

In my opinion this is a red flag, it shows that founders and early investors would rather sell at the current price than stay in, and they typically have a bit more information (insider trading laws notwithstanding) than the general public.

The stock market is an excellent place for fools and their money to be parted, think of it as a giant casino where the house controls the games and the information available, the SEC controls some of the rules and the public is (usually) clueless.

[fpgeek]

I wouldn't say founders selling is a red flag. Often the overwhelming majority of their net worth (plus a decent chunk of their future professional earnings) is tied up in their company. At some point they need diversification far more than they need to maximize returns on company stock.

Early investors are another matter, of course. They usually have other ways of diversifying so that's not a plausible motive for sales in most cases.

[jacquesm]

Ok, reword that: 'founders selling a substantial chunk of their stock'.

If it is a relatively small portion then it makes sense as a risk diversification strategy.

[Ntrails]

If I had 10 million dollars worth of stock in my company and was otherwise pretty much poor, you'd see me selling a good 50% regardless of how confident I am in the company.

When people float companies they built and worked at for a long time with little tangible reward it is not unreasonable for them to want to take their money and actually enjoy it.

[refurb]

The public markets definitely are for venture investing that was their origin and still is a main function today.

I guess it all depends on what you call venture investing. I don't think that Sergey and Brin could have IPOed 6 months after founding Google - the public would have found the idea of investing absurd. So instead they went to VCs who can actually realize value in a "idea" and are willing to invest at a reasonable valuation.

Raise enough VC money and you can advance the company forward enough so that the general public see value in your company (usually revenue). At that point you can IPO and actually get a decent valuation.