Fred Wilson: VC needs "a new path to liquidity," the 100-word version
Microsoft is asking News Corp. to help it buy Yahoo. Yahoo wants AOL and Google to help it remain independent. Meanwhile, writes VC blogger Fred Wilson, websites and services acquired by these companies like Flickr, AIM, Del.icio.us, Yahoo Groups, and FeedBurner continue to languish. Which is why Wilson thinks venture capitalists need a new path to liquidity besides flipping startups to a big company (too easy) and going public (too hard). He'd like to see a private-equity marketplace, where entrepreneurs can cash out without selling out. His 1,104-word argument cut down to size, below:
Here's the problem: Entrepreneurs need to get paid. Those who finance need return on investment. It's nuts to take any company public that cannot deliver consistent and predictable growth and earnings quarter over quarter for years. We've sold Del.icio.us, FeedBurner, and Tacoda, to Yahoo, Google, and AOL, respectively. Were we happy to take their money? Yes. But look deeper. Del.icio.us: the user base has fallen off. FeedBurner: I don't see any integration between AdWords and FeedBurner. Tacoda: top members of the Tacoda team are gone. I am wondering if there is a better way: a place for private equity investors to trade securities. The companies remain private, do not file with the SEC, and do not trade daily. When an entrepreneur or investor wants liquidity on a position they own, they come to these private markets, offer their position or part of their position for sale, and a trade is made.