A year ago, when he last turned to investors to raise cash, tech entrepreneur Ken Lin thought a stock market listing was looming on his company's horizon. This is a rite of passage for many capital-hungry businesses, so it seemed he would follow the well-trodden path to Wall Street before long.

Last week, however, Mr Lin was back instead for another US$175 million (S$236 million) round of private money for Credit Karma, the personal finance website that he co-founded.

"There is a lot more you can do as a private company," he says, echoing the views of a generation of tech entrepreneurs who have learnt to shun the public stock market for as long as they can.

Staying private means there is no need to waste time sweating over quarterly earnings reports. "In public markets, you can lose the long-term view to focus on the short term," says Mr Lin.

With investors lining up to pour cash into firms like Credit Karma, which has sucked in nearly US$370 million so far, the pressure to conform to Wall Street is off. "You can raise funds in fairly short order, and still have the benefits of being a private company," says Mr Lin.

Silicon Valley is in the midst of another investment boom - one unlike any that has gone before. The tech bubble at the end of the 1990s spilt out onto Wall Street as new companies with no track record queued up to do initial public offerings. This time, with valuations once again soaring, the party is raging behind closed doors.

The risk that another bubble is being inflated is only one of the anxieties. The surge of private investment has also raised questions about how well equity markets function on such a large scale without the high levels of disclosure and other checks and balances seen in public markets.

The exclusive nature of the tech sector's private investment frenzy has stirred concerns as well, about how widely profits from the boom are being shared - and whether the investment game is only for privileged insiders with the right connections or the strongest investment clout.

In terms of demonstrating the new supremacy of private markets, last month was noteworthy. First, the news came out that Uber was on track to increase its total capital-raising to US$10 billion, a record for a private tech firm. That was followed by the revelation that Palantir, a secretive artificial intelligence company, was in talks to raise hundreds of millions at a valuation of US$20 billion, which could rank it behind only Uber (value: US$50 billion) in the pecking order of private tech firms.

Palantir's new status was short-lived. Soon, home-rental site Airbnb was on the brink of a new investment round of its own, with a valuation of US$24 billion, more than double the US$10 billion it was deemed to be worth 15 months before. At US$1.5 billion, the fund-raising involves more money than was raised in all but the five largest tech IPOs in history.

The surge in private capital has left a dearth of IPOs. Last year, 59 tech firms went public, compared with 258 in 1999, although one was Alibaba, the Chinese e-commerce group that raised a record US$25 billion in its IPO.

One result has been the proliferation of so-called "unicorns", private firms that claim a valuation exceeding US$1 billion. There are over 144 globally, with 69 in the United States.

The renewed burst of private capital-raising has provided fresh evidence of how the tech industry's financing boom has been limited to a charmed circle of investors able to get a foot in the door of the hottest new prospects. All the risks of this tech cycle are being shouldered by a far narrower circle of investors - but so are the rewards.

'SELF-FULFILLING PROPHECY'

Fast-growing tech start-ups once had little choice but to beat a path to Wall Street. "If you needed to raise US$100 million 10 years ago, there really was only one way to get it," says Mr Andrew Boyd, who heads equity capital markets at mutual fund group Fidelity, one of the most active private-market investors. "Now, if you need to raise (funds), there is a sizeable group of investors making late-stage investments, and it is not super clear that you should go public. Choice is good, and that choice is here to stay."

And with the global economy still struggling, investors have found themselves with few alternatives when looking for high-growth businesses. "Growth has never been more valuable to investors than it is today," says Mr Jim Davidson, who co-founded tech private equity firm Silver Lake. Mutual funds, which are judged on their performance relative to their peers, are hungry for any edge they can get.

Hedge funds, private equity firms and sovereign wealth funds have also rushed to join in, hoping to secure a piece of promising start-ups at just the moment that their businesses really take off.

"It's a little bit of a self-fulfilling prophecy: The only way to be part of the meteoric growth part of the curve is to be in the private market," says Mr Dylan Smith, a co-founder of Box, an online storage company that rode the private market for 10 years before going public this year.

Wall Street short-termism has long been a complaint among tech firms, echoing Mr Lin's barb about quarterly reports. Now, they can point to a new embodiment of their fears - activist investors such as Carl Icahn who have taken to prowling Silicon Valley, putting pressure on underperforming public tech companies to cut

costs, split up their businesses or sell themselves.

The long product cycles of many tech companies require patient investment, and make them vulnerable to opportunistic attacks, says Mr Scott Kupor, a managing partner of Silicon Valley venture capital firm Andreessen Horowitz. Thus, staying private for longer is a form of self-preservation.

This has shaken up the normal order of the equity markets. Investors who once expected a considerable discount to invest in the illiquid shares of private companies now seem prepared to risk paying a premium, as shown by the IPOs of Box, big-data company Hortonworks and software firm Relic, each of which went public recently at a valuation below that seen in its previous private round.

With investors still clamouring for a piece of the most disruptive new tech start-ups, this inversion of the normal state of affairs could well persist. The belief in the tech world is that the boom has longer to run, even if valuations look extravagant. Yet, how this boom in opaque financial markets will unfold is now the subject of intense debate.

There is also heated debate about the essential fairness of the new market structures that are emerging. Companies that are able to pick and choose between potential backers are often selecting groups like Fidelity, T. Rowe Price and Wellington, leaving smaller institutions and private investors out in the cold.

This has led to a "bifurcated market", says Mr Kupor at Andreessen Horowitz, one of the venture capitalists that has invested most aggressively in the boom. "We're certainly closing off a large part of the market to the broader retail (investor) base," he says, adding that private investors such as Andreessen will benefit "disproportionately".

If the previous tech boom sucked naive personal investors into a bubble, the opposite is now the case. Under US regulations, only "accredited investors" - those with substantial personal assets - are allowed into private investments.

But even most of these have no way of investing, unless they are clients of a powerful investment bank or want to take their chances buying in one of the private secondary marketplaces that have started to spring up.

Those forced to wait until hot companies like Uber go public are likely to miss out on the biggest gains. "By the time a deal gets to the public, it will be a shallower growth curve," says Ms Lise Buyer, an adviser on IPOs who worked on Google's public listing a decade ago.

There is also a danger that new incentives engendered by private markets will create unexpected risks. The greatest, say experts, could stem from the terms that private investors often demand to protect themselves in the event that a firm goes public at a lower valuation. Under an arrangement called a "ratchet", they get extra shares to compensate for any shortfall, which dilutes the interests of other shareholders.

J.O.B.S. ACT

One of the main forces behind the upending of the usual order in US equity markets is a piece of legislation that backers claimed would encourage companies to go public, but that has had the opposite effect.

The Jumpstart Our Business Startups (JOBS) Act was intended to ease regulations for firms looking to go public. Signing it into law three years ago, President Barack Obama said it was crucial for more growing companies to list their shares on Wall Street. Public companies tend to expand and hire more workers, he said, and they "operate with greater oversight and greater transparency".

However, buried in the legislation was a provision that turned out to be a gift for companies preferring to escape the rigours of being publicly listed.

Previously, private firms had to publish detailed financial information about their operations when their shareholder numbers hit 500 - a requirement that was often a catalyst for an IPO, as it removed one of the main attractions of staying private. Facebook's IPO in 2012, triggered after it hit the 500 shareholder limit, drew attention to the rule.

By lifting the limit to 2,000, the new law has removed the pressure to list.

Critics argue that this has barred ordinary stock market investors from investing in the hottest new tech companies. "The outcome of the JOBS Act was to widen the gap between the haves and the have-nots," says Ms Buyer.

Other pieces of financial regulation have had a greater effect on discouraging companies from seeking a listing, market participants say. Much of the criticism has been levelled at the Sarbanes-Oxley Act, which was passed in the wake of the Enron scandal and has been widely attacked in Silicon Valley for imposing excessive regulation on young companies.

"The infrastructure on which our public markets are built is all from the 1930s, and the patches on top of that operating system have led to a situation where companies do not want to be public," says Mr Rett Wallace, the founder of Triton Research, a company that researches private firms.

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