Goldman Sachs CEO David Solomon questions the need for startups to go public

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Goldman Sachs Chief Executive David Solomon warned private companies to be “extremely cautious” before deciding to go public, adding that the depth of capital in the private markets meant that many companies would not need to go public at all.

“Today, you can access capital privately at scale. . . . You can also access liquidity in private markets. So when you really get to incredible scale, the rationale for going public is eliminated,” Solomon said in a statement. Speaking at the Cisco Artificial Intelligence Summit in Los Alto.

“If you’re running a business and it’s growing, if you take it public, it’s going to force you to change the way you do business, and you should really be very cautious about doing that,” he added.

Goldman Sachs’ role as a trusted IPO partner has been core to its business for years, but the market has slowed since 2021 as interest rates rose. The bank has increasingly provided services to large private technology companies that have delayed public offerings.

Goldman Sachs helped Stripe raise $6.5 billion in 2023, allowing the payments company to stay private longer. Solomon said such deals were part of a “more fundamental long-term trend” of fewer public companies.

The biggest startups, including Stripe, artificial intelligence group OpenAI and Elon Musk’s space exploration company SpaceX, have delayed going public despite valuations ballooning into hundreds or even hundreds of billions of dollars.

They have discovered deeper and deeper sources of capital, tapping venture capital giants like Josh Kushner’s Thrive Capital as well as sovereign wealth funds in the Middle East and elsewhere. They also found ways for employees to cash out their shares on the secondary market.

In doing so, they have created a new type of private “startup” that is comparable in size and complexity to public companies but lacks the scrutiny and reporting obligations that come with public markets.

“Being a public company is not fun,” Solomon said. “Who wants to be a public company?”

But given the growing importance of private capital, he added: “You have to ask yourself why we have different standards when the same people are buying things publicly and privately.”

Solomon, Goldman’s chief executive since 2018, also talked about the impact of artificial intelligence on his firm’s business and the businesses of its clients.

Solomon said the bank currently has 11,000 engineers among 46,000 employees and is using artificial intelligence to help draft public filings.

Solomon said that the work of drafting an S1 (the initial registration prospectus for an IPO) might have taken a team of six people two weeks to complete, but now 95% of the work can be done by artificial intelligence in minutes.

“The last 5 percent is important now because the rest are commodities now,” he said.