Why Do Startups Become Unicorns Instead of Going Public?

Daria Davydova, Ruediger Fahlenbrach, Leandro Sanz and Rene M. Stulz
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Daria Davydova: Ecole Polytechnique Federale de Lausanne
Leandro Sanz: Ohio State U
Rene M. Stulz: Ohio State U and ECGI

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: Unicorns are startups that choose to stay private even though they are large enough to go public. We propose an efficiency explanation for their existence. Startups relying highly on organization capital are more vulnerable to expropriation of their organization capital if they go public before their position is sufficiently secure. Our main empirical findings are that shocks to the fragility of organization capital decrease the IPO likelihood, unicorn status enables startups to stay private longer by giving them access to new sources of capital, and unicorns and their industries have higher organization capital intensity than other startups.

JEL-codes: G24 G32 G34 (search for similar items in EconPapers)
Date: 2024-06
New Economics Papers: this item is included in nep-cfn, nep-pay and nep-sbm
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Working Paper: Why Do Startups Become Unicorns Instead of Going Public? (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2024-10

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