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It's definitely true to an extent that when the founders doesn't have any control or motivation, the outcome tend to be subpar. Also, the post highlights the ob
by vthallam 10y ago
It's definitely true to an extent that when the founders doesn't have any control or motivation, the outcome tend to be subpar. Also, the post highlights the obvious difference between PE and VC that PE mostly looks for min guarantee return and companies which are predictable to get them returns through either a sellout or IPO. What i wonder though is, why would founders in general go for this buyout(apart from the obvious reasons like money). Is there any reason companies are sold to PE investors in general?
- beat 10y agoOne could certainly interpret a PE buyout as an "exit".
- alistairSH 10y agoThis was true with my employer. The first PE transaction was the owners/founders cashing out. The company was about 40 years old at the time (and the founders, while on the board, were no longer part of the executive team), so not quite the same as a start-up doing a PE deal.
- notahacker 10y agoSometimes the most obvious reasons are obvious because they're the reasons. PE companies are quite happy to buy founders out and let them sit back or earn out. As another user has pointed out, that's essentially an exit. It's much more attractive to many founders than the VC offering them at best a 50/50 chance of cashing out in future once liquidation preferences are factored in and demanding much more performance, probably over a longer period, to get to that stage. Also, there are plenty of companies which are attractive to PE companies (profitable, steady growth which could be a bit faster) but not attractive to VCs (market is pretty well defined and never going to be huge) so the PE investors are the only ones approaching them.