Comments on: Why VC-backed firms can’t stay private http://blogs.reuters.com/felix-salmon/2012/12/17/why-vc-backed-firms-cant-stay-private/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: hypermark http://blogs.reuters.com/felix-salmon/2012/12/17/why-vc-backed-firms-cant-stay-private/comment-page-1/#comment-45280 Tue, 18 Dec 2012 19:14:24 +0000 http://blogs.reuters.com/felix-salmon/?p=19863#comment-45280 Felix, I am assuming that you see this as what it is. A talking point, nothing more, nothing less.

It’s great narrative. “We want to build large, game-changing companies and businesses – not pursue liquidity events.” As an entrepreneur, that sounds really good, even if we both know that the path is liquidity within five years – either M&A, IPO or RIP.

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2012/12/17/why-vc-backed-firms-cant-stay-private/comment-page-1/#comment-45255 Mon, 17 Dec 2012 19:44:17 +0000 http://blogs.reuters.com/felix-salmon/?p=19863#comment-45255 ” If companies don’t sell, and they don’t go public (Andreessen isn’t a fan of going public, either), then how can VCs get their exit? Andreessen has an interesting answer to that one:

We want to fund the companies which are so successful, and so in control of their own destiny, that they don’t sell, and they also, ideally, don’t go public. And then in 10 years, 15 years, they’re all sitting in our portfolio; they’re all big, and successful, and private. And then we get just enormous pressure and backlash from our limited partners, our investors, saying, basically, where’s my money. Why haven’t you taken these companies public, why haven’t you distributed the stock.”

Where’s the answer? There is none. He doesn’t answer the question, because LPs have to be dissolved at some point, and 15 years is usually the max. So do you give them shares in the privately held company? What do they do with them if they aren’t paying dividends?

Andreessen wants to just use other people’s money to grow companies, but those other people expect something from letting him use their money. The only solution is to have investors who also want to build successful companies and don’t care about an exit, but that’s not how VCs raise billion dollar funds. If what he really wants to do is build big companies without worrying about exits, then he needs to raise money from people like him – who don’t need to make money on their investments.

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