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Very good point about farm league and doing different things -- but it's not clearly the case that a VC can hold onto their Facebook or Google stock. Generally
by rlucas 9y ago
Very good point about farm league and doing different things -- but it's not clearly the case that a VC can hold onto their Facebook or Google stock.
Generally, there are restrictions in the LP agreements that may limit the amount of the fund that is in publicly-traded securities. There may also be requirements for distribution to the limited partners of public-traded securities.
VCs are paid to make illiquid private investments and massage them through to the point that they are liquid (cash, or marketable securities). LP investors, as a whole, are less than sanguine on the VCs subsequently becoming public markets equities horse-bettors.
- birken 9y agoThat is interesting. I did always wonder at what point the VCs transfer the returns of post-IPO shares to their LPs, because it seems like the timing on this can make a huge difference to the VCs return. Especially if the majority of your funds return is going to be concentrated in a few companies stock. Seems like it could make a big difference on what the carry is going to be which might make some weird incentives for the VCs. I was basing my comment on something a Sequoia partner said that they'd never sold a share of their Google stock, but that might have been their own personal investment (or frankly I have no idea how it works -- do LPs always get cash as returns or do they get shares of the post-IPO stock?).
- jacquesm 9y ago> do LPs always get cash as returns Unless a special deal is arranged it is cash in, cash out.