Companies, on average, are remaining private for 10 or 11 years when during the Internet Bubble "it was more like three or four years," Dan Cummings, head of Global Equity Capital Markets at Bank of America Merrill Lynch , told CNBC Monday.
"In many cases we were funding earlier-stage companies that may not have been ready for prime time," Cummings said.
From 1998 to 2000 nearly 1,500 technology companies went public, raising $114 billion. That avalanche of capital was laid at the doorstep of countless companies whose business would never turn a profit.
The key issue right now is "people are paying for what they think companies are worth in 2015, not necessarily 2011," he added. "If you look at it from the management standpoint and the venture capitalist standpoint they have very high hopes for the future and don't want to sell so much today."
Investors, on the other hand, are always curious about what are people going to do with the money, Cummings said.
He went on to say, "many of these companies generate a lot of cash and don't have a use for proceeds. So it's less about a tactic to constrain supply and more about finding out the right answers to capitalize the company and let it begin its public life."
Also,Cummings stressed thatinvestors need to be cautious when turning to private exchanges, like SecondMarket and SharesPost, to buy shares of non-public companies such as Facebook or Twitter.
"They don't necessarily have the full transparency, and there's a lot of asymmetric information that I think people need to be careful of," he concluded.
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