The first critical difference is that these late-stage private companies have not endured the immense scrutiny that is a part of every IPO process. IPOs are remarkably intense, and represent the most thorough inspection that a company will endure in its lifetime. This is why companies and their board of directors agonize over whether or not they are “ready” to go public. Auditors, bankers, three different sets of lawyers, and let us not forget the S.E.C., spend months and months making sure that every single number is correct, important risks are identified, the accounting is all buttoned up, and the proper controls are in place. Conversely, these late stage private rounds have no such pageantry or process. There is typically just a single PowerPoint deck presentation.
Sadly the above quote is not from Benchmark’s lawsuit against former Uber chief executive, and current board member, Travis Kalanick.
It’s from a blogpost that Benchmark partner, and former Uber board member, Bill Gurley wrote in 2015 about the lack of disclosure in late-stage funding rounds for private tech companies. The blogpost is titled, “Investors beware”.
Anyway, Benchmark is now suing Travis Kalanick for failing to disclose stuff…
Fire Travis Kalanick — FT Alphaville