Public or private, investment banks win either way.

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When David Solomon publicly downplays the value of companies going public, it can sound like turkeys voting at Christmas. The head of Goldman Sachs said Wednesday that the reason for startups to consider initial public offerings (IPOs) is “being pushed out.” He’s right. Fortunately, banks like Goldman are still able to mint large fees.

The trend for startups to remain private for longer periods of time has been increasing over the past decade. In the 1990s, deep pools of venture capital were not so easily available to companies looking for cash and liquidity.

Social media forum Reddit waited nearly 20 years to go public, and finally did so last year. Klarna, a buy now pay later company also founded in 2005, will be celebrating its 20th anniversary even if it goes public this year as expected. Compare this to Google (now Alphabet), which went public just six years after its founding, or Facebook (now Metaplatform), which went from a dorm room project to a Nasdaq stock in eight years.

Although there has been some decline over the past decade, VC is still going strong. Tiger Global, Sequoia Capital and Andreessen Horowitz lead the pack. But companies are getting in on the act, too. Google Ventures has a portfolio of over $10 billion comprised of over 400 companies. Chipmaker Nvidia invested more than $1 billion in 50 funding rounds in AI startups alone last year. That money is worth more to a startup than ringing the Nasdaq bell in terms of patient capital, expertise, and potential market.

Even if a banker cannot act as an IPO underwriter, he or she can act as a matchmaker. They have access to the VC departments, institutions, sovereign wealth funds, and family offices that late-stage startups crave funding from. As mom friends get involved, regulations could expand and the world of potential supporters could expand. Although perhaps modest, Twitter’s $1.8 billion IPO also resulted in underwriters sharing in a $68 million fee pool.

Another role is facilitation of retirement, including secondary sales of current or former employees. Such tender offers are popular with late-stage startups, such as financial payments group Stripe, which appointed Goldman Sachs to steer its takeover bid last year. In Europe, Morgan Stanley last year moved to sell shares in fintech Revolt to its employees. Private equity exchanges (such as Nasdaq’s Second Market and the London Stock Exchange’s upcoming PISCES market) still require the input of bankers.

In a sense, the greater the hype about taking companies private, the more Goldman will position itself as a provider of so-called alternative investments to its clients and charging correspondingly high fees. . They now account for $333 billion of the firm’s assets under management, and their 20 percent growth rate over the past year is nearly double Goldman’s total assets under management. For banks, the music never stops. It’s just that the melody has changed.

louise.lucas@ft.com

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