In the old days, every entrepreneur dreamed of easily taking their startup public, and making it big. Today the rate of startups going public (IPO -- Initial Public Offering) is up from the dead zone, but is still less than half the rate of 15 years ago. Smart entrepreneurs now avoid this option like the plague, due to its unpredictability and the challenges of running a public company.
According to a recent Ernst & Young global report, 2014 was a strong year with IPOs actually outperforming other indices by 10 percent. Yet they see warning lights flashing, based on a still fragile global economy, and volatile markets ahead. Today 70 percent of successful startups are still acquired by bigger companies, as the safer and preferred method of growth and funding.
The reasons are a lot more complex than the meltdown of key investment banks in the US a few years ago, so don't expect a big change in the numbers soon, even with recent stock market rallies. In my view, the key reasons that IPOs have lost their luster from an entrepreneur and investor perspective include the following:
These negatives have largely overshadowed the potential IPO positives of increased capital for the startup, possible huge increase in personal net worth, broader access to investors, market for their stock, the ability to attract top-notch professionals, and the peer prestige of running a public company.
Thus most startups I know don't even mention the IPO exit option, when applying for Angel funding, and most Angel investors will react negatively if you do mention it. As best, you should reserve this option for later stage VC discussions, once you have a well-proven business model, large market following, and substantial revenue.
More importantly, make sure first that you really want to give up the entrepreneur lifestyle for the challenges of a public company executive. I'm betting that Mark Zuckerberg of Facebook fame still has second thoughts from time to time, despite being worth $33 billion as a result.