As More Tech Startups Stay Private, So Does the Money IELTS Academic Reading Sample With Explanation
IELTS Academic Reading section tests a candidate’s ability to understand a passage and different types of questions. IELTS Reading sample passage - As More Tech Startups Stay Private, So Does the Money is an IELTS Academic topic. Candidates can practice from IELTS reading practice papers to get an idea of the passages and questions. This IELTS Academic passage contains three question types:
- Multiple Choice Questions with Single Answer
- Sentence Completion
- Matching Statements
Check: Get 10 Free Sample Papers
Check: Register for IELTS Coaching - Join for Free Trial Class Now
Section 1
Read the Passage to Answer the Following Questions
As More Tech Startups Stay Private, So Does the Money IELTS Academic Reading Sample
- Not long ago, if you were a young, brash technologist with a world-conquering start-up idea, there was a good chance you spent much of your waking life working toward a single business milestone: taking your company public. Though luminaries of the tech industry have always expressed scepticism and even hostility toward the finance industry, tech’s dirty secret was that it looked to Wall Street and the ritual of a public offering for affirmation — not to mention wealth. But something strange has happened in the last couple of years: The initial public offering of stock has become déclassé. For start-up entrepreneurs and their employees across Silicon Valley, an initial public offering is no longer the main goal. Instead, many founders talk about going public as a necessary evil to be postponed as long as possible because it comes with more problems than benefits.
- “If you can get $200 million from private sources, then yeah, I don’t want my company under the scrutiny of the unwashed masses who don’t understand my business,” said Danielle Morrill, the chief executive of Mattermark, a start-up that organizes and sells information about the start-up market. “That’s actually terrifying to me.” Silicon Valley’s sudden distaste for the I.P.O. — rooted in part in Wall Street’s scepticism of new tech stocks — may be the single most important psychological shift underlying the current tech boom. Staying private affords start-up executives the luxury of not worrying what outsiders think and helps them avoid the quarterly earnings treadmill. It also means Wall Street is doing what it failed to do in the last tech boom: using traditional metrics like growth and profitability to price companies. Investors have been tough on Twitter, for example, because its user growth has slowed. They have been tough on Box, the cloud-storage company that went public last year because it remains unprofitable. And the e-commerce company Zulily, which went public last year, was likewise punished when it cut its guidance for future sales.
- Scott Kupor, the managing partner at the venture capital firm Andreessen Horowitz, and his colleagues said in a recent report that despite all the attention start-ups have received in recent years, tech stocks are not seeing unusually high valuations. In fact, their share of the overall market has remained stable for 14 years, and far off the peak of the late 1990s. That unwillingness to cut much slack to young tech companies limits risk for regular investors. If the bubble pops, the unwashed masses, if that’s what we are, aren’t as likely to get washed out. Private investors, on the other hand, are making big bets on so-called unicorns — the Silicon Valley jargon for start-up companies valued at more than a billion dollars. If any of those unicorns flops, most Americans will escape unharmed, because losses will be confined to venture capitalists and hedge funds that have begun to buy into tech start-ups, as well as tech founders and their employees.
- The reluctance — and sometimes inability — to go public is spurring the unicorns. By relying on private investors for a longer period of time, start-ups get more runway to figure out sustainable business models. To delay their entrance into the public markets, firms like Airbnb, Dropbox, Palantir, Pinterest, Uber and several other large start-ups are raising hundreds of millions, and in some cases billions, that they would otherwise have gained through an initial public offering. “These companies are going public, just in the private market,” Dan Levitan, the managing partner of the venture capital firm Maveron, told me recently. He means that in many cases, hedge funds and other global investors that would have bought shares in these firms after an I.P.O. are deciding to go into late-stage private rounds. There is even an oxymoronic term for the act of obtaining private money in place of a public offering: It’s called a “private I.P.O.”
- The delay in I.P.O.s has altered how some venture capital firms do business. Rather than waiting for an initial offering, Maveron, for instance, says it now sells its stake in a start-up to other, larger private investors once it has made about 100 times its initial investment. It is the sort of return that once was only possible after an I.P.O. But there is also a downside to the new version to initial offerings. When the unicorns do eventually go public and begin to soar — or whatever it is that fantastical horned beasts tend to do when they’re healthy — the biggest winners will be the private investors that are now bearing most of the risk. It used to be that public investors who got in on the ground floor of an initial offering could earn historic gains. If you invested $1,000 in Amazon at its I.P.O. in 1997, you would now have nearly $250,000. If you had invested $1,000 in Microsoft in 1986, you would have close to half a million. Public investors today are unlikely to get anywhere near such gains from tech I.P.O.s. By the time tech companies come to the market, the biggest gains have already been extracted by private backers.
- Just 53 technology companies went public in 2014, which is around the median since 1980, but far fewer than during the boom of the late 1990s and 2000, when hundreds of tech companies went public annually, according to statistics maintained by Jay Ritter, a professor of finance at the University of Florida. Today’s companies are also waiting for longer. In 2014, the typical tech company hitting the markets was 11 years old, compared with a median age of seven years for tech I.P.O.s since 1980. Over the last few weeks, I’ve asked several founders and investors why they’re waiting; few were willing to speak on the record about their own companies, but their answers all amounted to “What’s the point?” Initial public offerings were also ways to compensate employees and founders who owned lots of stock, but there are now novel mechanisms — such as selling shares on a secondary market — for insiders to cash in on some of their shares in private companies. Still, some observers cautioned that the new trend may be a bad deal for employees who aren’t given much information about the company’s performance.
- “One thing employees may be confused about is when companies tell them, ‘We’re basically doing a private I.P.O.,’ it might make them feel like there’s less risk than there really is,” said Ms.Morrill of Mattermark. But she said it was hard to persuade people that their paper gains may never materialize. “The Kool-Aid is really strong,” she said. If the delay in I.P.O.s becomes a normal condition for Silicon Valley, some observers say tech companies may need to consider new forms of compensation for workers. “We probably need to fundamentally rethink how do private companies compensate employees because that’s going to be an issue,” said Mr.Kupor, of Andreessen Horowitz.
- During a recent presentation for Andreessen Horowitz’s limited partners — the institutions that give money to the venture firm — Marc Andreessen, the firm’s co-founder, told the journalist Dan Primack that he had never seen a sharper divergence in how investors treat public- and private-company chief executives. “They tell the public C.E.O, ‘Give us the money back this quarter,’ and they tell the private C.E.O., ‘No problem, go for 10 years,’ ” Mr.Andreessen said. At some point, this tension will be resolved. “Private valuations will not forever be higher than public valuations,” said Mr. Levitan, of Maveron. “So the question is, will private markets capitulate and go down or will public markets go up?” If the private investors are wrong, employees, founders and a lot of hedge funds could be in for a reckoning. But if they’re right, it will be you and me wearing the frown — the public investors who missed out on the next big thing.
Section 2
Solution and Explanation
Questions 1–4
Choose the correct letter, A, B, C or D.
Write the correct letter in boxes 28–31 on your answer sheet.
- How much funds would you gain by now, if you had invested 1000$ in the Amazon in 1997?
- 250,000$
- close to 500,000$
- It is not stated in the text
- No funds
Answer: A
Supporting sentence: if you made an investment of 1000$ in Amazon, you would have gained 250,000$ by now.
Keyword: Invested, Amazon
Keyword Location: Paragraph 14
Explanation: The selected answer is correct as evident from the supporting sentence, it is clearly mentioned in paragraph 14 that if in 1997, you invested 1000$, you would have gained 250,000$ by now.
Read More IELTS Reading Related Samples
- Nowadays founders talk about going public as a:
- necessity.
- benefit.
- possibility.
- profit.
Answer: A
Supporting sentence: nowadays founders talk about postponing going public as it has become a necessary evil but it comes with more problems than benefits.
Keyword: necessary evil
Keyword Location: Paragraph 3
Explanation: as it is mentioned clearly in paragraph 3 that the founders have been talking about postponing the necessity of going public, as it is more problematic than beneficial.
- In which time period was the biggest number of companies going public?
- early 1990s
- late 1900s and 2000s
- 1980s
- late 1990s
Answer: B
Supporting sentence: hundreds of tech companies went public annually during the boom of late 1900s and 2000s.
Keyword: boom, tech companies
Keyword Location: Paragraph 15
Explanation: it is clearly mentioned in paragraph 15 that the biggest number of companies going public was in the late 1900s and 2000s, as per the statistics by Jay Ritter, the finance professor at University of Florida.
- According to the text, which of the following is true?
- Private valuations may be forever higher than public ones.
- Public valuations eventually will become even less valuable.
- The main question is whether the public market increase or the private market decrease.
- The pressure might last for a long time.
Answer: C
Supporting sentence: the question is whether the private markets go down or the public markets will go up?
Keyword: capitulate
Keyword Location: paragraph 21
Explanation: As Mr Levitan said that the private valuations will not always be more than that of the public. So, the question arises whether private markets will decrease or the public markets will increase.
Questions 5–9
Complete the sentences below.
Write ONLY ONE WORD from the passage for each answer.
Write your answers in boxes 5–9 on your answer sheet.
- Skepticism was always expected by the of tech industry.
- The new aversion to initial offerings has its .
- Selling shares on a secondary market is considered a mechanism.
- Workers' compensation might be an .
- The public investors who failed to participate in the next big thing might be the ones wearing the.
(Guide: Candidates need to answer the questions in not more than one word)
Question 5.
Answer: Luminaries
Supporting sentence: the luminaries of tech industry have often expressed hostility and skepticism towards the finance industry.
Keyword: skepticism
Keyword Location: Paragraph 2
Explanation: As mentioned in paragraph 2, the luminaries of the tech industry have always expected skepticism and expressed hostility towards the finance industry.
Question 6.
Answer: Downside
Supporting sentence: the new aversion of initial offerings also has a downside.
Keyword: aversion
Keyword Location: paragraph 13
Explanation: as evident from the supporting sentence and precisely mentioned in paragraph 13, the new aversion to initial offerings has a downside too. The private investors who are bearing the biggest risk will emerge as the biggest winners.
Question 7.
Answer: Novel
Supporting sentence: now, there are novel mechanisms such as selling shares on a secondary market.
Keyword: mechanisms
Keyword Location: paragraph 17
Explanation: Initial public offerings were a way to compensate the employees who owned stock, but now selling shares on the secondary market have become a novel mechanism, so that insiders can have a way to cash in their shares in private companies.
Question 8.
Answer: Issue
Supporting sentence: the tech companies are needed to consider new forms of compensation for workers.
Keyword: compensation
Keyword Location: paragraph 19
Explanation: compensating employees is going to be an issue, so the tech companies would have to think of new ways to compensate the workers, if the delay in IPO becomes a normal condition in Silicon Valley.
Question 9.
Answer: Frown
Supporting sentence: if the private investors turn out to be right, then the public investors would be wearing the frown.
Keyword: wearing
Keyword Location: paragraph 22
Explanation: the private investors could be in for a reckoning if they come out as wrong, but if the public investors might be the one wearing the frown if they fail to participate in the next big thing.
Questions 10–13
Do the following statements agree with the information in the IELTS reading text?
In boxes 10–13 on your answer sheet, write
TRUE if the statement agrees with the information
FALSE if the statement contradicts the information
NOT GIVEN if there is no information on this
(Guide: Candidates need to answer the questions from 10 to 13 by selecting True or False or Not Given)
- Private investors are bearing most of the risk.
- Not many investors were willing to speak on the record.
- The typical tech company hitting the markets in 1990s was 5 years old.
- Marc Andreessen, the firm's co-founder, expressed amazement with divergency in how investors treat public.
Question 10.
Answer: True
Supporting sentence: private investors will be the biggest winners, who are bearing most of the risk.
Keyword: bearing, risk
Keyword location: paragraph 13
Explanation: it is true; new aversion to initial offerings has a downside and the private investors are bearing most of the risk, but they are doing so at the possibility of emerging as the biggest winners.
Question 11.
Answer: True
Supporting sentence: only few investors were willing to speak on the record.
Keyword: record
Keyword location: paragraph 16
Explanation: it is true because only few investors were willing to speak and get on record about why they were waiting.
Question 12.
Answer: Not Given
Explanation: the passage does not mention about the age of the company that hit the markets in 1990s.
Question 13.
Answer: False
Supporting sentence: Mr Andreessen told the journalist that he had never seen a sharper divergence.
Keyword: divergence
Keyword location: paragraph 20
Explanation: it is a false statement because Mr Andreessen expressed that there is a sharp divergence between how the investors treat the public and chief executives of private companies.
Comments