I think what you’ll find is most VC firms have a rough strategy that they make sure the LPs (their own investors) are well aware of and bought into.
- Every LP has (and many venture firms have) real scar tissue from investments that IPO’d, then flopped, and went from Unicorns to losers in the portfolio. So most (not all) LPs really want you to, or at least think you should, make liquid anything that can be liquid, absent a compelling reason.
- But … they also have watched many of their best VCs hold on for appreciation, and dramatically increase the returns of a fund, via power laws, by holding longer post-IPO. >> One investment trading up 2x from the IPO can mean more for the fund than all the other investments combined. And it’s zero work. <<
The scar tissue means at least you have to have a strategy. Or at least — a plan.
A typical strategy is either: (1) distribute as quickly as possible without harming the company or (2) distribute over the first 24 months.
It does take a certain amount of chutzpah to hold more than 24 months.
Published on February 18, 2016