Public markets are doing a good job of valuing technology companies, but the same cannot be said for private investors, closely watched venture capitalist Fred Wilson said Monday.
The big problem: Start-ups can get much better valuations in the private market, so when they go public, their shares may end up trading below their last round of financing, the Union Square Ventures founder said.
"The idea that you can buy stock privately in a company and then it goes public six or nine months later, and you're going to make three or five [times], that's just not going to be the case for many people," Wilson told CNBC's "Squawk on the Street."
Private markets need to be ratcheted back, but how that will happen remains to be seen, because so much money is chasing deals and bidding up prices, he said.
Companies should be going public earlier in their life cycles so the broader public can become shareholders, Wilson added.
"I think it's not good for society for all of the gains in these game-changing companies to be held between a very, very small group of shareholders," he said.
Wilson chalked up delays in going public to bad public policy, saying regulation such as the Sarbanes-Oxley Act create hurdles to taking more companies public.
The 2002 Sarbanes-Oxley Act is meant to protect investors from fraudulent accounting practices by requiring companies to establish strict internal controls. However, some critics say the compliance costs associated with the rule and the large penalties companies may face if they make mistakes on financial statements discourages some firms from going public.