Gerstner predicts most IPOs in the next twelve months will price below their last private round.
“majority of companies that come public in the next twelve months are going out below their last”
Gerstner says Instacart will IPO at around $10B versus its $50-60B private valuation, an 80% down round.
“Right? Super high quality company. I think its last private round was 50 or 60,000,000,000 in the bubble, and now it's rumored to be going public at somewhere around $10,000,000,000.”
Gerstner advises startups to reprice businesses honestly or shut down rather than extend convertible debt.
“reprice the business, get the price right, and if that is not satisfying to you, if you don't own enough of the business at that point in time or whatever, call it quits and restart, right? Because you've got to have the foundation right in these businesses.”
Gerstner warned founders that 30 to 50 percent down rounds destroy morale and few companies survive it.
“point in time, you're gonna be forced to do a 30 to 50% down round, and very few Silicon Valley companies, even the best ones survive the morale hit, and all of the challenges associated with the down round of that size.”