Built to Last vs. Built to Flip
| April 21, 2008 |  View for printing |
Fred Wilson wrote a blog last week on VC exits, bemoaning the lack of liquidity paths. I admire Fred tremendously (both as an investor and blogger!) and think It's a great blog, but it only covers a part of the story.
First, a bit of background. VCs need their start-ups to exit in order to pay back their limited partners. The IPO window is effectively closed for VC-backed companies and even when it was somewhat open in 2006-2007, the bar was very high (typically you needed $100m in revenue, profitability and 7-9 years of operating history). The practical path to liquidity for entrepreneurs, therefore, is to sell your company to a larger (typically public) company for cash and/or stock - an M&A exit. Fred points out that, as a rule, Web start-ups simply do not thrive when snapped up by the (depressingly few) prospective acquirers like Google, Yahoo and AOL - leading to an unsustainalble cycle.
Full Discussion: http://alwayson.goingon.com/permalink/post/26542
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