So let's stay I start a startup, grow and manage to take it public, what happens next? Is the company expected to keep growing indefinitely? What happens if growth is stagnant, but the company is profitable?
I also hear about the mid-life and late stage of companies. Can you explain what these terms mean and how being in these stages affects the company?
Are there any good examples of publicly traded companies which have lasted a long time (more than a few decades) with minimal impact of the "we have to keep growing" mindset?
Finally, what are the pros and cons of being private without vc funding and being a public company?
And what role does VC play in the broader economy? Does it manage eg pension money? Are there good resources to understand the lifecycle of VC funded companies and what role VC plays in the broader ecocomy?
There definitely are companies that are on the stock market without a growth mindset. One way to identify them is to look for companies that return a significant amount of money to their stock holders in the form of a dividend.
Many REITS fit this description as utilities and telecom companies.
I'm always surprised this answer doesn't come up more, but I guess these companies aren't particularly sexy.
Note: These companies still feel market pressure. No one is staring at Duke Energy expecting them to grow 15% a year, but people would be pretty frustrated if DUK broke its 13 year 4.5% dividend streak.
> Are there any good examples of publicly traded companies which have lasted a long time (more than a few decades) with minimal impact of the "we have to keep growing" mindset?
Are there publicly traded companies which _didn't_ have a thirst for growth? By definition, companies which go to the lengths of raising money on the stock exchange are exactly those who grew beyond small business / private equity levels. So this question seems paradoxical to me.
I should have worded it differently: what I was trying to ask was - publicly traded companies by definition have to keep growing and have the "we have to keep growing" mindset, and this often negatively impacts the products eg- facebook showing ads way too often, collecting more user data and it's parly driven by the desire to keep growing and earning more ad dollars. Fb is a perfect example of a product going downhill as it grows. Are there companies which continue to make products loved by users even though they have the "we have to keep growing" mindset? One example was Apple, but they are starting to faulter, increasing prices way too much. Some gaming studios are publicly traded and seem to be doing fine. The WWE company also seems to be doing fine. I'm looking for such examples but companies which have been around longer than that.
I see, something like sacrificing long term viability for short term growth? Since jacking prices may give you a great quarter but destroy your brand in the long run.
My understanding is that big value stocks which pay dividend have less pressure to grow, while growth stocks use growth rate to justify their extreme PE ratios, and so might seek it more.
You could look at it more like their are companies like Ford that look a very long time to build a supply chain and distribution network that may have hammered long term innovation thinking, innovation is required to sustain growth over very long periods of time, and many huge companies either don't focus on that because of other business complexities, or because the supply chain is so tight it's very hard to undo and re-tool to innovate.
Lots of good questions. Maybe a primer on the relationship between a VC and a founder would be helpful.
Say you are a founder, you've got a killer idea, you think you can change the world with this idea but you need capital to bring it to life. Say you can demonstrate on a small scale that your idea does work, you have analysis that the market will support your idea, but you need money again to make it a reality. VCs come in, say we'll give you a boat load of cash today, in exchange for a hefty portion of your company, based on an evaluation that we're going to make. They usually take a board seat, and will be a part of your company's leadership, but remember the goal of the VC on the board may not always align with what other board members want for the company, VCs are looking to make the company's evaluation value grow so their investment is worth more than they spent, usually for a set amount of time or some sort of liquidation event occurs, be it acquisition, IPO, or shutting it down.
VCs work within a fund, a set amount of capital to invest, and that fund generally has a timeline, say 10 years, for the fund to end and realize any and all profit and losses and close the fund down. Once a company goes public, the VC can choose to do what they want, including completely selling all the shares they can convert into straight cash, or holding onto it, or devise some other strategy to distribute stocks to it's limited parters (the other groups of capital such as pension funds, college endowments, etc. etc.) for them to do what they wish.
Early/Seed, Mid-Stage, Late stage, these are generally terms to describe where a company is, and sometimes can be seen as part of the VC chain, seed / series A, Series B-C, Series D and above if additional rounds of funding are needed.
There are plenty of companies that exist to purely exist and serve their customers, by the time a company goes public, VCs are generally long gone as their funds have run their course. The VC model is a relatively new investment invention compared to industrial companies of the early 1900s in manufacturing let's say.
The pros and cons of a public vs private company can fill an entire textbook. They're just different models of operating, with different legal ramifications, different things you can and cannot do as a public company versus a private company, as well as access to capital which as a public company comes much easier (sell your share to the public) than it can when you have to pitch private investors.
In the broader economy, VCs play a small part, endowments, pension funds, other investment groups, may as part of their investment strategy partner with various VC and PE firms. But there's there's a diversity of firms that operate VC funds, it's not all just in one company (although one could argue Softbank Vision fund is just that), and each VC and PE firm has their own investment philosophy on how they stay successful.
So let's stay I start a startup, grow and manage to take it public, what happens next? Is the company expected to keep growing indefinitely? What happens if growth is stagnant, but the company is profitable?
I also hear about the mid-life and late stage of companies. Can you explain what these terms mean and how being in these stages affects the company?
Are there any good examples of publicly traded companies which have lasted a long time (more than a few decades) with minimal impact of the "we have to keep growing" mindset?
Finally, what are the pros and cons of being private without vc funding and being a public company?
And what role does VC play in the broader economy? Does it manage eg pension money? Are there good resources to understand the lifecycle of VC funded companies and what role VC plays in the broader ecocomy?