Are IPOs the New Ponzi Scheme?

Are IPOs the New Ponzi Scheme?

How venture capital funded startups run up massive losses while justifying premium valuations using creative profitability metrics. These private companies are now going public allowing early investors to cash out with sizable gains. Meanwhile, these new publicly traded companies are added to equity indices, forcing passive managers to purchase them for their index funds and ETFs.

In this episode you will learn:

  • How venture capital and initial public offerings work.
  • How many venture capitalists are there and how have they performed.
  • Why do startups stay private for longer and then go public while still incurring massive losses.
  • What is blitzscaling.
  • How startups use creative profitability metrics to attract investment capital at premium valuations
  • How the current venture capital regime contributes to income inequality.
  • How to get an allocation to an initial public offering.


Thanks to Policygenius and TripActions for sponsoring the episode.

For show notes and more information on this episode click here.

  • [0:19] What are IPOs?
  • [2:12] The growth of new venture capital firms.
  • [5:22] Blitzscaling and the willingness of venture capitalists to initially lose money.
  • [8:33] How start-ups are choosing to exit.
  • [11:18] The cost of going public at premium valuations.
  • [13:26] The social and economic repercussions of blitzscaling.
  • [18:16] How money-losing firms try to create a profit.
  • [19:38] How unprofitable companies convince investors to buy at high valuations.
  • [21:20] How individuals participate in venture capital without investing in an IPO.
  • [24:08] Possible solutions to IPO’s problems.

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