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Comment by wepple | Hacker News Reader

This is an interesting shift compared to the past where OpenAI would’ve been public a long time ago (due to various regulations) so we would have much more direct insight.

Right now we have a ~$1 trillion company which a ton of the “economy” and valuations are based on, with near zero information on how it’s doing.

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It’s because this IPO is backed by those who grew up through the boom and bust of the dotcom era, so they know now to do all their growth in secret behind the scenes and then dump onto the market when there’s nothing more in that tank. Rather than letting the public have any major growth out of their baby, and only letting the price discovery phase work one way.

I agree with you and the parent comment, but to be fair to VC, they're also assuming risk. For example, if Wework had IPO'd earlier the public would've been holding the bag instead of private investors.

If they had IPO’d earlier there probably would have been better oversight of the excesses.

I mean "oversight" just means shareholders would lose money. The losers would be members of the public rather than funds invested by KSA.

Kind of agree but their risk is actually spreading through the entire system, as today shows.

VC money is weird. It can come from private individuals, from loans with extremely low interest, from private funds...

The thing is normally it's money that's intended to be burned in the search of a unicorn, cheap money, so there's no real "risk" there.

The common perception is that OAI/Anthropic are pumping up their hype before they unload on retail in their IPOs

The problem is that the US can't even sell treasuries at 5½% and they're safe as houses. Also houses are not selling.

What risk is VC assuming in late stage? The only way a business fails at that point really is fraud or management failure.

I agree but not sure WeWork is a good example. That smelled like pump and dump scheme from the beginning. They pretended to be tech company, while actually being landlord middlemen. Plenty of people predicted that downfall.

WeWork collapsed because of their S-1 was on fire. If they had gone public earlier, it would have still been on fire. The reason they lasted that long is because Masayoshi Son didn't do anything that resembled due diligence, but the market would have always done it.

Good point. The market may not always be rational, but it's often more so than any individual investor.

Don’t sovereign wealth funds and pension funds also invest in VCs? So even if it’s “private” people are holding the bag?

Also, I think comparing WeWork to AI labs is not valid.

These labs have increasingly become of public interest and are shaping economies around the world, WeWork was just not at that level.

What if it's just because the numbers aren't that great at the moment?

Right but why would VCs want this? Wouldn't VCs value the liquidity of being able to flexibly enter and exit positions? I really wish there were a simple explanation of why companies don't want to IPO as early as they used to but there isn't. The closest I've found when talking to CEOs has been they don't want shareholders putting pressure on them for quarterly results and diluting the company's focus, especially when it's still growing and doesn't have a mature business.

> Wouldn't VCs value the liquidity of being able to flexibly enter and exit positions?

Everyone's eager to get a slice of these pre-IPO companies, and the marginal utility of having it be more liquid on the public markets probably doesn't outweigh the legal requirements behind going public. It's not like VCs are stuck holding the bag until an IPO these days. I'm not sure why that changed, but it's probably not healthy.

> Everyone's eager to get a slice of these pre-IPO companies

I know plenty of companies that are failing on VC dime, whose investors can't sell their equity. I disagree that everyone wants a slice of these companies. It's not clear to me whether it's a net win for VCs to hold onto illiquid investments for so long (meaning I can see both the upsides and the downsides.)

https://youtu.be/roe3SgezmmU

VCs just want returns on the money, and they don't need to use the stock market for that as much anymore.

This mad dash to build companies worth TRILLIONS and with trillions of dollars in capex commitments based on the best of all possible worlds coming true for their products comes from this generation of CEOs. Nobody is saying “ok we’ve reached a new threshold in AI let’s see if we can expand slowly so it improves over the next 20 years”. They’re saying “we are on the verge of AGI and Superintelligence so we need hundreds and hundreds of billions of dollars to be spent to make it happen NOW”.

Then they'll turn around and say there's a decent chance ASI will kill us all, so better we build it before China does.

> Then they'll turn around and say there's a decent chance ASI will kill us all, so better we build it before China does.

So true. I know I'd rather be murdered by an American ASI than a Chinese one.

I think that's mostly so govt blocks their competition as much as possible

"Then they'll turn around and say there's a decent chance ASI will kill us all, so better we build it before China does."

And also set up moats so for security only they are allowed to push the state of the art forward.

Yeah that whole mass annihilation of humanity dollar. That’s a good dollar. Worth winning the rush to capture that one.

Paraphrasing Bill Hicks.

"Right but why would VCs want this? Wouldn't VCs value the liquidity of being able to flexibly enter and exit positions? I really wish there were a simple explanation of why companies don't want to IPO as early as they used to but there isn't."

To me it's pretty clear. The earlier investors take out all the possible upside and then dump it on the retail market. The retail investor will be less and less able to buy stock that will grow 10x and more. It's hard to imagine SpaceX, OpenAI or Anthropic will multiply in value after the IPO. They are priced in a way that they have to execute perfectly for a long time to justify even their current price.

Just another step for the super wealthy to keep profits for themselves instead of letting the broader population to benefit.

Have we considered that many of them are rather dumb.

That’s actually not why. It’s because of regulations put into place after Enron collapsed that made it harder and more expensive to go public.

Those regulators in 18 months time: “We had no idea that crash was going to happen. Nobody saw it coming.”

Companies used to *need* to go public in order to either raise capital or because they were going to have to start publicly reporting anyways due to the number of shareholders.

The JOBS Act and proliferation of double-vesting trigger RSUs effectively negated these forcing functions and 'going public' went from a necessary growing pain to a burden and distraction.

It goes both ways. There are a lot of software companies that VCs poured money into that have turned out to be worth a fraction of the valuations.

Yeah, I have similar thoughts. If SpaceX's IPO has been a dumpster fire, and share price dropped to the third of its initial value, it would still have been massively overvalued, and made Musk much richer than if they went with a more realistic market cap, and let the market carry them upwards.

Why is it still afloat then?

> zero information on how it’s doing

I think the fact that we have so little information is the most important information we have. If OpenAI had a sound business plan and was on strong financial footing, they'd have IPO'd.

All of this continued stalling and obfuscation can only mean one thing, IMO: OpenAI has no long-term viability and they're desperately hoping for some new breakthrough to reinvent their business model before the VC money faucets turn off for good.

The same is true for Anthropic, by the way.

Yep, I agree. The only 'frontier' any of the big labs are racing towards is the frontier of financial ruin.

I think we're going to suddenly see them greatly scale back training and try to sell inference-only, but they all know when they do that someone can jump up and outstrip them.

> I think we're going to suddenly see them greatly scale back training and try to sell inference-only

Remember a few weeks ago when all the AI labs said "we need to slow down, to uh, prevent destroying the world"?

Ding!

In this version of conspiracy theory, all the labs secretly understood that training wasn't economically feasible anymore so they all jointly made it look like they were stopping for safety reasons.

Is there no end to this kind of lazy conspiracy theory

You don't need to communicate to coordinate. All these companies have the same business model, if it was financially advantageous for one of them to push that narrative, then it's financially advantageous for all of them.

Or all the big ones are content with the current status quo and willing to compete amongst each other and want to shut the door to upstarts.

You see it time and time again.

Yup - period 1,2,3 shut the door. Then periods beyond that agree to fight it out.

Posters like simian are in denial and delusional about reality.

He doesn’t know anything about industrial organisation and yet has the bluster to post about it.

He ought to google ‘tacit collusion’.

So the more likely answer is they are on the verge of making super intelligence that could kill us all?

No. But more likely that they, the labs, are acting in good faith.

That's not required, merely that the labs _think_ there is a _chance_ (like Coxon's 10%) that they are on the verge of it.

But only as long as training actually improves models significantly. As soon as those improvements stay below a certain threshold, the better move is to invest your R&D money into other things like harnesses or new tricks one can play with existing models and the immense cost of training is just not worth it to be 0.5% ahead.

I'm absolutely certain that we will reach that point, just not when. Could come sooner than we think though.

Don't get me wrong I still want the models intelligence to improve, but for all practical purposes we are already there this is why many people are already moving to cheaper/open source. There is still a case though for the 1% of queries that demand SOTA

At that point they would lose all advantage stemming from their ability to boil the ocean though.

Well there certainly is at least some kind of viable business running large AI models for a fee.

These are useful and too big to run locally.

The ultimate size of that business in terms of revenues and profits may not match current expectations, but it's also not 0

> Well there certainly is at least some kind of viable business running large AI models for a fee.

ok, where are:

- The economies of scale?

- The network effects?

- The switching costs?

- The intangible assets (e.g. brand?)

Running AI models for a fee has none of these. At best, there are some economies of scale for running a datacenter, but OpenAI and Anthropic have none.

Amazon will be able to run large models for a fee, and make money on it. It's not a trillion dollar business, it may not even be a good business, but they'll be able to do it.

Sure, a supermarket will sell avocados if they make a profit, and won't sell them if they don't. That's a very different business model; the product is the infrastructure, not the AI.

There are not as many network effects, intangible assets, or switching costs as other businesses. I believe there are economies of scale in terms of power and cooling and network bandwidth and the people who plug in cables and other such things.

The business logic is similar to the general transition to cloud. Corporations and individuals are better off paying someone else to manage physical hardware that they just access over the network. That is even more true of large, expensive, fancy AI GPUs than regular web servers.

OpenAI and Anthropic may both fail, or may not, I don't know. But I'm sure there is some kind of viable business running some kind of AI in the cloud.

> OpenAI and Anthropic may both fail, or may not, I don't know. But I'm sure there is some kind of viable business running some kind of AI in the cloud.

The problem is that the investment does not expect "some kind of viable business" ROI needs to be in the order of several trillion for this to make any sense.

Well sometimes when people invest money that does not work out.

That money may not be made back in the way people hope.

But there is a whole ecosystem of companies on OpenRouter etc. who have a viable commodity business serving Chinese open source models on GPUs. I'm sure at least some kind of business like that will survive even if OpenAI and Anthropic completely fail. And I'm sure AWS, GCP and Azure will end up having something like that too.

Anthropic appears to have found a path to profitability: https://www.forbes.com/sites/jonmarkman/2026/08/17/anthropic...

I believe the entire basis of their profitable quarter was getting a discount on compute from Musk.

All these figures are so utterly weaselly. AAR is a made up measure to make them look good. If they cannot show GAAP numbers, they are hiding something. Full stop. While as private companies they are under no legal obligation to show us their books, their PR and intent to go public requires it.

Those numbers intentionally exclude the single largest operating expense that Anthropic has: model training. [1]

So yeah, if they stop training models forever, Anthropic will probably start making a profit... until someone else with better models comes along to eat their lunch.

[1] https://www.morningstar.com/news/marketwatch/2026091414/the-...

In the discussion of a similar article, it was called PBBT - profit before bad things.

So... "revenue"?

Or if model training is more of a rollercoaster, where spending gets you to the top of the hill where you create a massive internal model which can then build the next version of itself for cheaper and cheaper amounts relative to human R&D costs. If Anthropic is first over that hill, they can race far ahead.

Maybe... just maybe companies find an equilibrium? Maybe companies reinvest in training because there's performance increase?

Hahaha here he is.

How confident are you that these firms are going to survive if they’re fudging the numbers?

kind of puts it in 4K the reason behind "we must pace the frontier"

I am not even sure that is true. We don’t know everything that is included or excluded from their calculation. I suspect there is a lot of funny math going on to get to profitability. Remember there was a lot of similar talks and reports about SpaceX and how profitable they were. The reality was much worse. I just don’t believe it until I see it in the S1. Even then they can hide quite a bit.

Hence a company with a second revenue stream such as Google has an advantage, in my opinion

Advertizing is an amazingly durable and high margin business imho.

They have found a path to “profitability” iif you define “profitable” in a way that makes every early stage start-up that has at least one paying customer as “profitable”. Literally any start-up has a COGS lower than their income, but that doesn't mean anything at actual profitability given that the rest of their expenses dwarfs it.

These figures are EBBT.

Earnings Before Bad Things.

If an AI company can exclude the cost of training the new models they release every three months from the business of whether they are profitable, it would be shocking if they weren't profitable. And the figure is tiny compared to the valuation they appear to be seeking, and may only be positive because of a short term boost.

Steve Eisman said the other day that he suspects part of Anthropic's rush to get to IPO is that their third quarter figures are terrible.

I loved how Dario used to AIsplain to credulous interviewers that AI labs had invented an entirely new business model where they were always highly profitable for their current commercially available model, but training the next bigger model made it look like they were losing money.

And suggesting that maybe accounting norms should be changed so they could pretend that they were actually profitable despite the minor detail that they were consistently spending way more than they earned at any given point in time.

This was back in 2024 or so and the zeitgeist was still focused on the idea of the labs racing to AGI instead of building and selling products, with Sam Altman opining about whether money would even exist under AGI and his laughable suggestion that OpenAI might decide to give every American citizen shares in OpenAI for some reason.

If nothing else at least now they seem to be scrutinized more like regular tech megacorps instead of a sort of private yet benevolent Manhattan project of ascetic technopriests building a utopia machine.

And now they spend more time talking about building a doomsday machine that will kill you all and also show you ads.

If the ads are as bad as the AI-generated ads I now get on Youtube, I will take option 1.

(And yeah, there’s always some new variation on “we should be able to call it capex”)

I'm insanely profitable each month if you exclude my mortgage and bills and shopping too.

My low level conspiracy theory is AI is encouraging habits of people not to read so noone can read statements like "we excluded our costs from our profit calculation"

Anthropic likely would not be saying, in October, that they planned to go public next month, if this were also true of their business.

In the last ~month, OpenAI announced a delay to its IPO and Anthropic put a relatively near-term range on its IPO date. These are very different signals.

> Anthropic likely would not be saying, in October, that they planned to go public next month, if this were also true of their business.

they are 50/50 at best.

IPO = It's Probably Overpriced.

The reason is that companies can choose the best timing to go public - when their financial look the best - and they do. Anthropic trying to go public very soon is a good tell their financial look pretty decent. OpenAI postponing the IPO is a very good tell theirs look bad.

> If OpenAI had a sound business plan and was on strong financial footing, they'd have IPO'd.

OTOH, if a company has a sound business plan and strong financial footing it may not need to IPO -- unless the founders or VCers want out ASAP.

They do because the other part of the equation is that they need to keep spending a lot of money to build out infrastructure faster than their two most significant competitors, one of which is public and wildly profitable (for non-AI reasons) and another has already filed for IPO. So it puts them at a disadvantage to walk away from a massive cash infusion.

I think the answer is simply that private money is cheaper than public money for these companies right now.

OpenAI hasn’t had any problems getting impressive amounts of funding. So why ipo?

Two reasons. First, there's more money in the public markets, and Altman's appetite seems insatiable (he's the one who's been calling for gigantic, government-sponsored "Manhattan Project" efforts related to AI); and second, public money comes with fewer strings attached - private investors want protections, board seats, etc.

I don't think this is right.

Who knows what Altman wants? It's moot what individual motivations are as he is definitely fronting for investors who have significant power in the business.

Public money comes with legal fiduciary duties.

The reason to IPO is to get private money out, materialise the whole valuation.

I certainly wouldn’t say that public money comes with fewer strings attached. Just different strings. But the strings that come with public money tend to have sharper legal teeth behind them.

I don't know why comments pointing out this simple fact are getting downvoted.

The oversimplified view that has been drilled into startup discussions for years has been that IPO is the singular goal for every startup and they need to get there as fast as possible, but that hasn't been true for a long while. There are high profile examples like Stripe with no intent to go public any time soon. Some public companies are even gradually doing share buybacks partially to remove their public exposure.

Being a public company kind of sucks in many ways. I'll admit my sample size is small, but every post-IPO CEO I've known has expressed some regrets about going public. It was a fascinating revelation to me after being raised on the idea that IPO is the ultimate victory goal of every startup.

I'm guessing downvotes are not because people don't understand that this happens, but because based on OpenAI's words and actions it is highly unlikely that this is what they are doing. Also, Stripe has been confirmed to be profitable.

I understand it as IPO is the ultimate victory for investors. They finally get their reward, sell in the overpriced moment and can go their merry way.

lol but they're trying to IPO, it's what sam altman has been talking about for the past 2 years? Are you saying you know something better about sam altman than his public opinions?

I am not sure why you'd, at this late date, think Sam Altman's public statements have anything to do with anything. Time and time again demonstrated compulsive bullshitter.

What makes us sure, that his public statement reflect his opinion?

If they wanted to IPO they could do it at any moment and have a swarm of bankers and lawyers knocking down their door to work 16 hour days to get it done.

The only reason they’re not doing it is by choice, because they want to find an optimal time to maximize their returns.

There is no “we’re trying to IPO but can’t”. If they were actually trying, it would be in motion.

How do you know they aren't actively working on it?

he just knows ok? /s

That poster has been caught telling a pack of lies borderline fantasy stuff and runs away when confronted.

IPO is the singular goal for a venture backed company…

The founders and VCs can shell shares to private investors, it's the employees who are sitting on options who get fucked.

Whatever private-market liquidity events they will be permitted to participate in will be highly disadvantaged compared to the other two groups.

Unhinged conspiracy, if you take the implicit goals of AI research orgs at face value (I.e., replacing all knowledge work) and assume it possible; why would they drag a few thousand knowledge workers along to the promised land when they can just shed them after their usefulness has worn out?

What does adding a few more suckers to the pile of tens of millions of other suckers do to those that get the real benefits? It’s not like after they achieve their goals, the people who helped them would have the ramp or resources to recreate the process.

That then begs the question of whether there's any promised land at all after all knowledge work is replaced.

If you've made tens of millions of people unemployed over the timeline of a few years, then you no longer have nearly the market to sell goods and services - including your AI - to.

Assuming these guys answer that with "let's make UBI" - which is a huge assumption given the way SV fetishizes those who "create value" and looks down upon those who don't - you now basically have tech feudalism. The remaining upper crust "generously" pays the rest of the population enough to not starve until they die.

You'll basically have an entire society in stasis, with no hope of improving their lot, being given the bare minimum to keep humans alive, if that. Well, no hope of peacefully improving their lot.

It won't be a promised land at that point.

From my read this line of thought was alluded to by GP's ironic "promised land". A promised land for whom? Not for the vast majority of humankind.

Comparisons to feudalism kind of sell the direness of the AGI vision short: in feudalism, the lord still depended on the peasants. The lord would be inconvenienced if he had them all killed. Not so with AGI! He won't even notice their gone.

Exactly why I’m confused with the “techno-feudalism” point as well. What are the serfs for if they’re useless (sans some physical labor maybe?). The AGI dream is for the smallest amount of humans needed to keep the system running, and if AI can do everything feasible, then that group is basically those that “own” the AI. Techno-feudalism, if even necessary, would be a fleeting blip in the end.

Manual labor and, at least for a while, protection.

Mankind has never been content with "basic" income. Columbus was not starving. He sailed into the unknown anyway because he was greedy.

Besides as much as I love UBI it requires Star Trek technology: ubiquitous space travel and replicators.

VCs always want out when they've made their return. They are not in the business of owning companies for income.

The investors need to make a couple trillion dollars soon or it all falls apart, right? Maybe I misunderstand how the financing for this works, but my understanding is they have borrowed and set on fire an enormous pile of money as a sacrifice to summon the Machine-God.

If He fails to arrive, or arrives late, they will be the railroad financiers in the Panic of '73.

At scale that OpenAI is valued at public markets are only place with enough of liquidity. At smaller scale private equity is an option. But if you are speaking of near trillion scale it really is not.

They are in a vicious circle there’s no good way out of. Building and operating their services is not operationally profitable. Therefore they need more funding. The only way to get more funding is to get a wider adoption and show new features. The only way to do that is to keep spending money.

Not being profitable in itself is not a problem or has not been historically. With software, there’s a bunch of investment into making the service but the variable cost of providing it is negligible. It’s ok not to be profitable because the growth of userbase will pay you back. Capex isn’t a thing, you can just rent somebody else’s from the cloud. This is how the world used to work pretty much for a quarter century, ever since the dot-com bubble. But OpenAI is not like it. Their variable cost is huge as is the capex to enable being able to even make that cost happen. It’s not that they are not profitable, it’s that their financial profile does not fit into anything this generation of decisionmakers is used to.

> I think the fact that we have so little information is the most important information we have. If OpenAI had a sound business plan and was on strong financial footing, they'd have IPO'd.

What about Stripe?

> OpenAI has no long-term viability and they're desperately hoping for some new breakthrough to reinvent their business model before the VC money faucets turn off for good.

If a startup is riding a hype cycle and is one of two leaders in the global industry with unreal growth numbers, they can IPO whenever they want. The incentives lean toward doing an IPO before the hype runs out, not delaying it.

If they were worried about running out of VC money, going to the public (the P in IPO) would be the move.

Companies don't actually have to go public quickly or even at all, even though that's been drilled into us as the only goal of every investor-backed startup.

Which is why Spacex was so rushed, and why they insisted on new rules for early exits and inclusion in the Nasdaq 100 index.

I'm not certain OpenAI or Anthropic have a viable business, either, but Spacex definitely pulled a massive scam.

I know it would be unworkable ripe-for-abuse, but for a moment I wished there was no tax if you sold from an index fund that broke its core rules and operating principles to invest in another that preserved them.

American venture capital and by extension US power (because the expectation is this is re-invested) means that it has to be allowed to happen whether you and I like it or not.

This is the entire game if you zoom out.

Exit -> Recycle some of the money so USA stays ahead. That is the entire game, you see it right...? I hope you do.

> If they were worried about running out of VC money, going to the public (the P in IPO) would be the move.

Yes? They were geared up for IPO this year until pushing it back. See all the marketing shenanigans around solving mathematics for this month's flavour. They have a balancing act to manage between the hype and the reality of the business.

Sam conceded he had no business plan in 2022 after releasing chatgpt. He even said he doesn't intend to come up with a business model, he would rather wait for the model to reach AGI then ask it to come up with a model.

No he wasn't wearing a red ball on his nose. He didn't even smile saying this. Dead serious.

And yet

I actually found the clip. I paraphrased but the essence is there: https://youtu.be/gjQUCpeJG1Y

Or, as Matt Levine put it, "We will create God and then ask it for money."

Gosh that man has a way with words

If they do make AGI, this is a winning strategy.

And if I found a cheap way to turn lead into gold, I'd be a trillionaire. That doesn't mean it's likely or even possible.

No you wouldn't - that's because everyone else would soon figure out how to do the same and there would be a gold oversupply.

Sounds similar to Sam’s problem.

But betting everything on that if is an insanely risky one.

If the AI bubble bursts China will still be the factory of the world. They literally out-export their internal economic problems.

But for the US this is the last throw of the dice. All chips on red.

They also have to be the only one to make AGI. Maybe 1 of 2.

Because he was in YC/Google/MBA-camp ala "If we have enough traffic, we will find out how to become profitable", since this how the valley thinks :-)

That is a caricature.

Sam parlayed working for YC into owning a significant holding of Reddit (and other companies?).

To me, he appears to be a successful parasite that selects the fattest hosts. There are plenty of people that laud VC culture.

Maybe Sam understood the deep wisdom of no revenue.

Silicon Valley No Revenue: https://www.youtube.com/watch?v=BzAdXyPYKQo

“The plan is to invent AGI and then task it with working out how to make money”

"If OpenAI had a sound business plan and was on strong financial footing, they'd have IPO'd."

This is a fallacious assertion, there are so many big private companies with strong businesses that stay private for a whole variety of reasons. E.g. Stripe, Revolut, Databricks, etc.

You're letting your bias leak out here.

There are bits and pieces of info scattered everywhere but no coherent picture. We know from a16z report [1] that only 2% of US households pay for AI subscriptions, so most of the seat based pricing comes from business and enterprise agreements. We know that OpenAI ads business has $1 billion USD in annualised revenue run rate [2]. We know from OpenRouter data [3] that in 2025 70% of the API token spend was across all the proprietary models (Anthropic did very well in 2025, while OpenAI clawed back market share in 2026).

It all starts to look like a very low margins business, and reminds me very much of telecom industry.

[1] https://www.a16z.news/p/state-of-markets-ii

[2] https://www.reuters.com/business/media-telecom/openais-ad-bu...

[3] https://openrouter.ai/state-of-ai

Nobody is quiet about doing well. And the frenetic release schedule of kinda half baked products tells a story (not a good one)

What regulation makes it so that a large private company would have to go public? You have it backwards. Increased regulations make it more burdensome for a company to go public, driving companies like OpenAI to remain private. If you made it less expensive and burdensome to IPO (decreased regulation), you would see companies go IPO earlier.

This also coincides with a growing market for private credit and VC which certainly helps companies stay private for longer.

Regulations that limit the ability of investors to invest in private companies, although these have been weakened in recent decades, which helps fuel the growth of private credit markets that allow private companies to stay private.

I'd say it's the growth of private markets to allow companies to keep getting funding even at the $100 billion range while staying private that has fueled the trend to stay private rather than SOX and other new regulations for public corporate governance dissuading them from going public.

>Regulations that limit the ability of investors to invest in private companies, although these have been weakened in recent decades, which helps fuel the growth of private credit markets that allow private companies to stay private.

Which regulations are these?

SEC 12(g). The cap was raised by the JOBS act.

It's not that you couldn't stay private before, but there wasn't much benefit because after crossing that cap you had reporting obligations comparable to public companies anyways.

I searched around and your original claim doesn't seem too convincing. Recall the original claim was

>Regulations that limit the ability of investors to invest in private companies ...

The JOBS act raised the cap from 500 investors to 2000, but with VC funds, that's hardly an issue. Does Anthropic (and other unicorns) really need 500+ VC backers? It might change behavior on the margins, but it's hard to imagine that's the cause for the paucity of public listings.

The actual change that made it more tenable to stay private is arguably the carveout for employee stockholders, but summarizing that as "limit the ability of investors to invest in private companies" is a bit misleading.

Meta (formerly Facebook) was forced to take their company public because of how many private investors they had. It’s the Securities Exchange Act of 1934 and also the Jobs Act of 2012 which set these limits (currently 2000 shareholders is the limit). Companies use right of first refusal on their shares to keep the number of shareholders low.

There was a rule[1] pre-2012 that forced public disclosure (akin to listed companies) for private companies when it had >500 shareholder (which counted employees with shares). This made it so that companies had a choice to stay private with all obligation of public disclosure or go public for added benefit of tapping public market.

In 2012 this was relaxed in JOBS Act which relaxed the 500 threshold to 2000 but more importantly it ignored employees so now private companies of gargantuan trillion dollar valuation and thousands of employees have no disclosure requirements.

So, this is a classic case of regulation that did well but was relaxed and now creates hidden risks.

[1]: https://www.investopedia.com/terms/5/500-shareholder-thresho...

I think they would have kept it under 500 if they had to. I doubt this is the determining factor. In fact a lot more than 2k investors have exposure through SPVs or holding companies on top of holding companies. So no, I don't think this was the determining factor that allowed OpenAI to stay private longer.

I disagree. Not counting employees as shareholders was the main kicker. There was a reason Google and Meta went public so early in their growth story.

Seems really unfair to early stage employees as without this they would be much less likely to receive equity from employers. I guess it would force some companies to go public earlier but at the expense of employees who would get virtually none of the upside, and startups can't compete for talent.

> Seems really unfair to early stage employees as without this they would be much less likely to receive equity from employers.

We have historical data on how it worked out for companies that were pushed into going public by the old regulations... Microsoft, Google, Facebook, et al.

Their early stage employees did... pretty well... financially.

The only real difference from the employee perspective is that a lot of the money that made them rich came from public investors (who also had a chance to make a lot of money), whereas now it only comes from private investors and the public is locked out.

> What regulation makes it so that a large private company would have to go public?

My guess would be - oxytocin, cortisol and dopamine regulation, or rather the failure of said regulation.

It's because reporting requirements changed, in particular employees with stock options no longer counted as shareholders for the purpose of crossing the mandatory reporting threshold.

Before that change companies like MS were in essence forced to IPO, because they'd get all the downsizes of public reporting, without the benefit of accessing market liquidity. So once you were over the threshold, it made no sense to not go all the way.

That's no longer true, and has coincided with a huge expansion in private equity funding growth stage companies vs needing public liquidity. As a result these IPOs being done after their growth stage is largely over are offering the public a very different bet that tech company IPOs of the past.

it really is a privatize the gains socialize the losses situation, isn't it? due to the new rules (or lack thereof), public investors didn't have access to all that growth.

no way it ever gives you a return like, say, the amazon IPO could've.

What are you talking about?

Losses are much more privatized staying private. Instead of hitting people's 401k or pension fund, this is mostly contained to a concentrated set of VC and PE investors, not large public markets.

The companies involved still come for the 401k/pension funds, they just now wait until the majority of the upside growth has been realized and then dump the downside on to 401k/pension funds.

See: SpaceX and the Nasdaq 100 rule changes.

the big losses haven't happened yet

IPO, insiders cash out, retail holds the bag

>Right now we have a ~$1 trillion company which a ton of the “economy” and valuations are based on, with near zero information on how it’s doing.

This is definitely by design and encouraged by the VC’s. It’s disgusting to consider what a simulacrum of a market the stock market has actually become.

> This is an interesting shift compared to the past where OpenAI would’ve been public a long time ago (due to various regulations) so we would have much more direct insight.

There's a good recent YouTube video about the shift in regulations that switched IPOs from being a way to raise money for growth to being a way to dump on retail investors after all the significant growth has been funded by private investors:

https://www.youtube.com/watch?v=roe3SgezmmU

What past regulations would have forced OpenAI to go public sooner?

They would go public if they were doing well.

They would also stop selling equity to private investors. They are likely diluting their own stake.

But they need the money. After all that has already been invested they still need more. That is all I need to know about any delusions that they are currently profitable.

I agree with you for sure, but fwiw there’s a simpler alternate explanation, or at least there’s another way of saying the same thing

I’ve asked at rapidlu growing unicorns where I’ve worked “why don’t we ipo” and the big wigs every time just say, “why?”

If the original point of the ipo was to raise money and now you can do that privately, it stands to reason that a simple explanation might be that it’s not worth the hassle until the VC’s say they want their money back

How much money do they have left? It is hard for me to see how OpenAI doesn't fail at this point. There is no business, no moat. Honestly, the best outcome seems like failing up into a Microsoft acquisition at this point.

They’re raising another $30B:

https://www.reuters.com/legal/transactional/openai-targets-3...

There is a moat: government contracts. Everything from NSF grant reviews, drone warfare, DHS visa processing and Medicare/Medicaid claims processing are up for grabs under the right administration.

it will fail the day there is a downturn of the economy. That day will be at a 2001 or a 2008 like event - anytime within the next few years (I've no crystal ball, but strong convictions haha).

And yes, they will be acquired by a company which will have survived the next crash at a fraction of their currently estimated valuation and we will truly have the next ride of the economy .. many years ahead if 2001 is an example.

Why does it have to be such a crash? Could it be just flatlining for a long time? Or perhaps slowly going down? What makes you so sure that it will be a big booom like dotcom or 2008?

Many reasons:

- economy has been slowing down (the real one, the people) while stocks are at record high

- a long overdue business cycle which has been pushed back and back and back ...

- rates hiking (in a slowing down economy)

- bubbles, and that AI bubble is huge. Loving AI on an every day basis but revenue wise, it's not mainstream, far from it. Average people want free stuff, they're good with Google or Facebook throwing them ads, they don't want to pay $200 for a subscription and fact is, 2026 revenues are about $100b totall. Meanwhile hyperscalers are spending about $1 to $2 trillion alone in 2026, and meant to increase within the next few years. You need a lot of imagination to see how this can "flatten" nicely.

Like internet didn't disappear after 2001, AI is here to stay, too. But...

The entire US economy is propped up by this bubble, so they will be propped up as much and as long as possible. Basically all money these days is going into this charade, to stop or even slow it down would cause a disastrous collapse

>The entire US economy is propped up by this bubble,

Not really. It'd be a dotcom bust, not a 2008 bust. The average American isn't substantially exposed to these companies and the banking system doesn't hinge on them, there's no systemic risk.

What it would do is wipe out the wealth of a lot of very affluent folks and private investors, which most of us could live with.

The only 'systemic' risk is to venture capital, which the US govt cares a lot about. VC money is why the US has been able to win the past 20 yrs, you realise that? Who funded Google, MSFT, Meta and so on..

>VC money is why the US has been able to win the past 20 yrs, you realise that?

win at what? 98% of Americans aren't going to care if a meteor drops on SV tomorrow. The day FAANG is done I'm throwing a party. I wish that incestuous industry would finally kick the bucket, 95% of American programmers don't even work there.

Do you seriously think anyone's shredding a tear if Zucc's net worth drops to zero and that privacy nightmare of a company is gone? Don't threaten me with a good time

Any company that would hypothetically acquire them would need to be able to fully - and indefinitely - subsidize their unsustainable operational costs. I don't see how that's realistic even for a company like Microsoft.

Casual Finance did a video on this recently. He explains that prior to 2012 there was a rule that private companies would need to start reporting their financials once they reach the threshold of 500 investors. Because of this they would usually just choose to go public at that point. But since the rule was removed, companies are waiting longer because they don’t have that forcing function anymore. Also, the rich have never been richer so the private money is abundant anyways so there isn’t really a need to go public until you’ve reached the highest valuation you think you can ever get.

We actually have a lot of information on this [1], just indirectly: reported figures, revenue commitments with the hyperscalers, announced funding rounds, and so on. The hyperscalers invest directly in OpenAI and Anthropic, so their bets rest on growth they can see from the inside. They have a clear view of the slope of the curve.

OpenAI is already at about $50B in annualised revenue, up from $21B at the end of last year. That puts it on track to beat its internal projection of $58B by year-end.

Of course, none of this answers the trillion-dollar question of whether that growth will continue. But that question is separate from the claim that OpenAI needs to go public before we can see what’s going on. If anything, I think it’s better for them to stay private while venture capital keeps funding them and until they’ve shown they can sustain their growth. The longer they wait before raising public money, the less risk they add to public markets.

[1] https://finance.visnia.xyz/economy/ai-buildout

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