socialmedian: The 'We Need To Own' Baloney

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The 'We Need To Own' Baloney

Source: A VC

Oct 15, 2009

Summary

Over the past few months, I've heard countless VCs utter the words 'we need to own' followed by some number. Often it is 20pcnt, but it is frequently 30pcnt. I heard someone tell me about a VC yesterday who said they needed to own 44pcnt. I was tempted to ask them to give me the number to four digits.

This behavior by VCs is not productive. I've said this before and I will say it again. We are putting our needs before the needs of our portfolio companies and the entrepreneurs who form them.

And this "need" is just greed. We don't need to own any specific percentage. We just want to.

How much of Google did KP and Sequoia own? You can say 'well that was Google' but it wasn't the greatest venture deal of the decade when they made their investment.

We took 10pcnt of a company a few years ago that has become our best investment. We own less than 10pcnt of it now. And we will make a ton of money on this investment, probably more than any other investment in our fund. And we own less of it than any other investment in our portfolio.

The VC business is not about grabb

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Comments (1)

Kitwindley,

Oct 16, 2009

Surely " need to own " is just code for " I want this much of your company for this much money " and/or " I want this much before I feel secure in making an investment/ I am prepared to take the risk of investing in you ".

So, partly it's a negotiation in terms of how much you think that company is worth at that stage, how much you are looking to invest and how much you want for that money and partly it's about attempting to excercise some control.

If you are going to take small percentages in companies then your chances of controlling or even influencing them are remote.

Regards, Chris.

The M & A Rainmaker.

http://mandarainmaker.co.uk/wordpress/