No. of Recommendations: 1
Goofy:
Interesting that you pick three of the, perhaps the most successful companies in recent history to demonstrate your point. I wouldn’t know how to do it, but I suspect if I could find a normalized way to do the calculation for all companies which have gone public the math would point in a quite different direction.
Regarding my observation that earnings in the public market seemed to be at least 1000's of times larger than in the pre-IPO market based on NVDA, AAPL, and GOOGL.
I would argue that the more interesting cases to understand would be where a lot of money is made. And in those cases, looking at 3 stocks that have made TRILLIONS for their owners, the amounts made post-IPO are 100s or 1000 times a much as the amounts made by the pre-IPO VCs.
But let us see what we can say about the VC vs Public markets as a whole.
Total US investment in Venture Capital: ~$1.25T.
Total return to VC in the US every year vary wildly, from about $100B to about $700B per year.
Total US investment in public stock: $66T to $77T.
Total return in public stocks, about 10% annually, rising to 16% annually in recent 10 year period. This would suggest a range of $6.6T to $9T per year.
Total invested in public markets / total invested in VC : 50 to 60 x as much in public stock as in VC.
Total annual returns in public markets / returns in VC : 7 to 90 x as much in public markets as in VC.
So overall, post-IPO stock gains are 7 to 90 times as large as pre-IPO gains. VCs are NOT sucking up most of the gains, not even close. Rather the opposite, public markets suck up way more gains from stocks than do pre-IPO VCs.
R:
