“By operating in secrecy, they’re able to avoid or evade accountability — and, in many instances, engage in anticompetitive behavior or even fraud.” — Renée M. Jones on unicorns

Twelve years ago there were 39 unicorns — private companies worth a billion dollars or more. Today there are over 1,400, collectively valued above $7 trillion, with the twin beasts of Anthropic and OpenAI at the front of the herd, driving the entire American economy. A good thing, surely?

Not according to Renée M. Jones, the SEC’s chief regulator of corporate finance from 2021 to 2023 and author of Untamed Unicorns: Why Startup Finance Is Broken and How to Fix It. The former SEC big game warden worries that this stampede of wild unicorns might be driving the entire American economy off a cliff.

Her problem isn’t that these private companies exist. It’s that we know almost nothing about them. That’s because of changes in the law since the Nineties that have lifted the hundred-investor cap on private funds, thereby enabling them to mushroom from under $1 trillion to $17 trillion. Add secondary markets where insiders quietly cash out, and the IPO becomes optional. And so we know almost nothing about companies like Anthropic and OpenAI with private valuations in the hundreds of billions of dollars.

The result is what Jones calls the founder-friendly model of Facebook, Uber or Airbnb. With super-voting shares at ten votes apiece, founders effectively choose their own bosses, thereby stripping investors of the power to discipline anyone. Think Travis Kalanick and Mark Zuckerberg. Think Theranos, WeWork and FTX.

Unicorns are named, of course, for their impossibility. Not so long ago, nobody could imagine a private company worth more than a billion dollars. However, with $7 trillion now on the table, Jones is concerned about the health of the American startup economy. On the brink of the OpenAI and Anthropic IPOs, I fear Renée Jones might be right about the dangers of a real crash triggered by the stampede of these mythical creatures. Jurassic Park is now playing in Silicon Valley. Pass the popcorn.

Five Takeaways

• The $7 Trillion Secret. 39 unicorns twelve years ago; over 1,400 today, worth $7 trillion — disclosing essentially nothing. The problem isn’t the valuations. It’s the secrecy.

• How the IPO Died. NSMIA (1996) grew private funds from under $1T to $17T; the JOBS Act (2012) moved the IPO trigger from 500 shareholders to 2,000. Insiders cash out on secondary markets — no prospectus required.

• Founders Choosing Their Bosses. Super-voting shares, ten votes to one. Dual-class was invented for Google’s IPO — now it arrives before the horn is grown.

• The Fraud Files. Theranos hid its lab; WeWork’s honest filing killed its own IPO; employees’ options went to zero. The blitzscale bill: broken taxi drivers, lax background checks, laws rewritten by the powerful.

• Not Teddy — Franklin. The New Deal’s disclosure architecture worked for ninety years — and the SEC is dismantling it now. Her warning, on the brink of the OpenAI and Anthropic IPOs: stop investing blind.

About Keen On America

Nobody asks more awkward questions than the Anglo-American writer and filmmaker Andrew Keen.

Website: https://keenon.tv/ Substack: https://keenon.substack.com/ YouTube: https://youtube.com/@KeenOnShow

Buy Untamed Unicorns: hup.harvard.edu/books/9780674296350

Chapters:

00:00:31 Introduction: 39 unicorns then, 1,400 now
00:02:06 What’s wrong with a billion-dollar startup?
00:03:09 Make IPOs great again: why won’t they go public?
00:03:53 From five years to twenty: the vanishing IPO
00:05:22 NSMIA: the 1996 law nobody’s heard of
00:07:14 Cashing out without an IPO
00:07:44 The JOBS Act and the 2,000-shareholder rule
00:08:13 Forge, EquityZen, and the secondary markets
00:10:38 The founder-friendly model: choosing your own bosses
00:11:50 FTX, Theranos, and the fraud files
00:12:06 The Google counterargument: dual-class before the IPO
00:14:52 Why shouldn’t we trust Dario and Sam?
00:18:09 Uber: the coup that required the press
00:20:31 The YouTube question: don’t startups need gray areas?
00:24:05 The Enron counterargument — and a Harvard classmate
00:26:20 Airbnb, Lyft, and the social costs
00:30:43 The remedy: disclosure, disclosure, disclosure
00:32:00 Shocked, shocked: what the VCs knew
00:32:55 WeWork: the IPO that told the truth
00:36:12 On the brink of the OpenAI and Anthropic IPOs
00:37:50 Not Teddy — Franklin: defending the New Deal architecture
00:39:49 Thanks and goodbye