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These are specifically in late-stage deals, like Uber's recent rounds. The investors aren't traditional VCs, but companies like Fidelity. They don't want a 5%
by tyre 11y ago
These are specifically in late-stage deals, like Uber's recent rounds.
The investors aren't traditional VCs, but companies like Fidelity. They don't want a 5% chance at a 100x return; they would much rather a near-guarantee of 2-3x with downside protection. That's why Sam compares them with fixed income.
- vasilipupkin 11y agoit's not clear why Fidelity would want a cap on the upside, since it needs to beat an index. Most likely, it doesn't think it's giving up any upside.
- jonknee 11y agoI would imagine ceding the cap makes it easier to get the 2x liquidation preference.
- caseyf7 11y agoThey give up the upside because they have protection from the downside (they get their money back first).
- vasilipupkin 11y agoI understand, I'm saying I don't think they believe they are giving up much upside at all
- lmm 11y agoNo-one wants a cap on their upside, whether or not they need to beat an index.