Don’t worry unicorns, public market validation is a mirage


« The valuations are just made up. »

This is a line I’ve heard (and read) over and over when it comes to the high prices that venture capitalists are paying to invest in tech startups, including the so-called unicorns. It’s said as a contrast to how companies are valued by the public markets, which is broadly-believed to be a better arbiter due to its relative size, dynamism and transparency.

And, to be sure, precious few of these unicorns have chosen to go public. But I’m not so sure that the public markets deserve their reputation as smarter than the private markets.

Since the beginning of last year, Pitchbook data shows there have been 17 U.S. IPOs of VC-backed tech companies that were valued at $1 billion or more either at the start or close of their first day of trading (excluding six such biotech companies). Of those, nine closed trading…

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