As Charlie Stross sadly points out, money in a VC/Built-to-Flip situation doesn’t follow to the technologists.

TED is correct on a reputation basis, of course, but the significance will depend in part upon who SL tends to dump and how key they are viewed as being to the company internally at the upper levels. I doubt it will have a major impact on SL’s business, though I would hope to be wrong.

Setting all other things aside, I will say as someone that manages PR crises, Skype’s and Silver Lake’s handling of this isn’t well done from a communications point of view. I’ve got more details here: http://bit.ly/iFywzw

The A-Players who are pioneers are critical for these companies, or they wouldn’t give them stock options at all. A private equity firm that takes over a chain of retirement homes doesn’t pay stock options because they don’t need A-Player pioneers. They need them in great tech companies.

A-Player pioneers will abandon Silver Lake companies (and other evil PE companies) because:
1. A-Players know their YEARS of hard work will result in nothing because…
2. Employees can be fired at any time. (At will) and would lose their stock options
3. Great employees often must leave because of politics. People don’t want years of stock flushed away because of politics.
4. It is easy for employers to “trump up” reasons to fire employees “for cause”.
5. Life events may mandate an employee leave (need to relocate for a spouse, etc.)

The worst part is that companies will often tell employees “Yes we can take back your options. BUT we never have yet. BUT I don’t think we ever would”. Lawyers would say managers should never say this, but it happens often because that is managers answer when employees ask “Why in the world do I work hard for years and lose my options”. This construct creates a chasm of confusion, which is only good when an employer wants to trick employees into working hard and then losing their options.

Often, a PE firm with a good reputation as a partner will win an auction against one with a bad one, even if the bad one offers more money. Sure, Silver Lake has lots of money, but so does everyone else in PE land. Silver Lake’s money is no greener than anyone else’s, and there is no shortage of potential PE buyers for any company.

I really do think this public tarring will hurt Silver Lake’s business at the margin for some time going forward. Will they fold, or fail completely? Of course not, if only because some sellers–often the ones who don’t plan to stick around after the buyout anyway–couldn’t care less whether their new majority owner is a bunch of a**holes. But many do.

Time, as they say, will tell. But I guarantee the chief guys at Silver Lake are worried.