If the incoming Trump administration and Congress want to spur job growth, they should focus on making initial public offerings more appealing to emerging companies.
That's the view of Scott Kupor, managing partner at venture capital firm Andreessen Horowitz.
Kupor, speaking at the CB Insights Innovation Summit in Santa Barbara, California, said there's almost no benefit today for a smaller company — under $1 billion market value — to sell shares to the public given the risks and the hassle.
Analysts won't cover them, there are no market makers for the stock and thus there's no trading and very low liquidity.
"You could in theory go public, but in effect you become orphaned," Kupor said. "We have to solve this problem because it has very serious implications."
With the exception of the rare Uber or Airbnb, the real job creators in tech are public companies, which have traditionally had greater access to capital and the ability to lure talent through stock-based incentives. The Jumpstart our Business Startups (or JOBS) Act of 2012 helped by allowing smaller companies to file confidentially.
But plenty more needs to be done, Kupor said. Last year was the weakest year for U.S. tech IPOs since the financial crisis.
Companies have been been able to stay private longer because of an influx of money into venture capital in recent years. Now, late-stage start-ups that raised lots of cash at big valuations are stuck, because there's less private funding available and the public markets are unwelcoming.
Kupor didn't offer specific suggestions, but said the regulators and lawmakers could work towards policies that fix the structural issues in the capital markets so there are incentives for investors to pay attention and companies to make the leap.
Otherwise, the U.S. risks losing its position as "a central place where companies get formed and go public," Kupor said.
For companies that are edging towards initial public offerings, Kupor said the metrics have changed. While investors still like to see $100 million in revenue, they'd prefer companies that are growing 35 to 50 percent and have a clear path to profitability over those that are expanding 75 to 100 percent but burning mounds of cash.
"It's a good market for good companies," he said.