Courtesy of tobatmuhkh
Taking a start-up business public through stock options has been the traditional approach for most entrepreneurs of the past. A entrepreneur would find a investor to fund the start-up. The entrepreneur would then have to either sell the company off or have an IPO and offer a public stock option in order to payback the investors. IPOs and the public option have taken a backseat in recent years to corporate buyouts for a variety of reasons. This shift in methods for generating financial revenues can easily be explained and with good reason.
The Payoff:
There comes a point with every business when the investor needs to recoup his/her investments and hopefully then some. Whether it’s selling out to the man or offering a public option, one of the two must be done to accomplish this. The shift from the public option to buyouts is happening for a variety of reasons:
- Entrepreneurs who start a business typically get bogged down in all the red-tape, paperwork, and regulations that come along with managing a public company.
- Entrepreneurs can often make much more in a shorter time with a buyout freeing them to start their next project.
- Most start-ups are able to grow for years without the need to secure a public option.
It’s worth mentioning though as the New York Times article below mentions, that companies such as Facebook and LinkedIn continue to be rumored as now large start-ups who might be looking to the public option. So while the shift to buyouts for many continues to occur, there are still a few who will most likely turn to the stock option and bare the burden in an effort to generate greater profits long-term.
Source: New York Times
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