Aspire | Action | Acquire
Aspire | Action | Acquire

Going Public

When Vance Packard conducted his interviews of thirty of America’s richest people in the mid-1980s, Bill Gates [Microsoft], Larry Ellison [Oracle], and the late Steve Jobs [Apple and Pixar] weren’t amongst those interviewed. They weren’t on the Forbes 400 list either. On the first Forbes 400 list were the late David Packard [Hewlett-Packard, now HP] the late Ross Perot [Electronic Data Systems, sold to General Motors] and Gordon Moore [Intel][1].

Back in the mid-1980s, around forty percent of America’s wealthiest did not inherit their wealth. Topping the early Forbes 400 list was J Paul Getty who had sold out his family’s interest in Getty Oil to Texaco, followed by Sam Walton, the founder of Walmart. These were mid-cycle entrepreneurs. Our current wave of rich listers from Amazon, Facebook, Google, and Twitter have also arrived mid-cycle in during the current information technology and communication wave.

Going public fulfills three purposes. One, it invites investment to develop and scale businesses. Two, it relieves original owners and investors of personal debt obligations. Three, it values a business in terms of its potential income streams. For more than a century, it is the last that has caused the most conjecture in that up unto that point businesses were primarily valued on assets. When Andrew Carnegie sold into America’s first listed billion-dollar-plus company, US Steel, he and his partners received a premium of more than twenty-five percent above Carnegie Steel’s total asset value.

Principally, business founders have two paths to raising money beyond their own means and family and friends. The first is through bank loans and the second is through investors. The latter can be broken down into phases. The first is Angel capital; the second, Venture Capital; the third, Mezzanine funding, and the last an Initial Public Offering (IPO). The autobiographies of Walmart co-founder Sam Walton, McDonald’s founder Ray Kroc, and Nike’s Phil Knight provide extensive insights into their experiences with seeking investment and bank funding as well as going public with an IPO.

In his autobiography, Sam Walton explains how his business wasn’t generating enough profit to payout its debts and expand. For Walton, going public enabled him to payout the banks and become self-funding.[2] The IPO also rewarded managers who were hired as limited partners. Ray Kroc, wrote of making June Martino, his bookkeeper who rose to corporate treasurer, and Harry Sonneborn, whose idea it was to finance McDonald’s growth through property development, wealthy beyond their dreams.[3] Phil Knight, whose book is testimony to the challenges of business, wrote of the financial necessity to go public at the risk of losing Nike’s “Buttface” culture amongst its founders[4].

Another path is to purchase an already public company, as Warren Buffett did with Berkshire Hathaway and then repurpose the business to acquire other businesses with predictable cash flows and profits. What is interesting about Buffett’s investments is that he hasn’t acted as venture capitalist, hedge fund, or mezzanine financier for the purpose of flipping them as IPO spin-offs.

[1] “The Forbes 400: Walton Tops List of Richest Americans,” Los Angeles Times (1985),

[2] S. Walton, and J. Huey, Sam Walton Made in America: My Story, (New York: Bantam Books, 1992), 127.

[3] Ray Kroc, and R. Anderson , Grinding it Out: The Making of McDonalds (Chicago IL: Contemporary Books, 1987), 149.

[4] Phil H. Knight, Shoe Dog: A Memoir of the Creator of Nike (London: Simon & Schuster UK Ltd, 2016).