What’s the best way to navigate exit options?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Some Thoughts On Founder Liquidity – AVC

I am not a fan of founder liquidity sales that result in more than 10% of the founder’s position being liquidated at any one time, an important exception to that rule is when a founder is leaving the company, particularly at the wishes of the board

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Some Thoughts On Founder Liquidity – AVC

I now believe that providing some founder liquidity, at the appropriate time, will incent the founders to have a longer term focus and that will result in exits at much larger valuations because, contrary to popular belief, founders drive the timing of exit way more than VCs do. Figuring out the “appropriate time” is tricky and there is no hard and fast rule

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Some Thoughts On Founder Liquidity – AVC

Once a company has become sustainably profitable, which in and of itself is a bit tricky to measure (GAAP Net Income positive?, EBITDA positive?, Adjusted EBITDA positive? cash flow positive?), I am more comfortable with the VCs buying in founder liquidity sales

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Staying Independent – AVC

Possibly the most interesting running conversation I’ve been having with entrepreneurs lately is how they can keep their companies independent without having to go public and turn their cap table into a casino. There are a bunch of entrepreneurs thinking seriously about this issue and I’ve been thinking seriously about it too.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Staying Independent – AVC

Another possibility is leveraged recaps and possibly dividends. If you build a business with excellent cash flow, there will be cash that can be used to pay out dividends or used to service and pay down debt. Dividends are not tax efficient under US tax law. The Company will pay income taxes on its earnings and then the investors will pay taxes again on the dividends. That is why leveraged recaps are more attractive in the US. Instead of paying d… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
When Things Don’t Work Out – AVC

So what happens when things don’t work out? There are generally two scenarios.
The first is the “slog it out” scenario. This one is in many ways the most painful. It means that there is a business that can be built, but it won’t be one that makes the VCs much money and because it takes so much time and money to “slog it out”, it doesn’t make the entrepreneur much money either. The second scenario is “hit the wall”. In this scenario, the company r… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Founders Circle – AVC

In a nutshell, Founders Circle provides liquidity for the founders and employees of a “breakaway growth companies” so they don’t need to sell or take the company public prematurely. It’s great to have investment vehicles like Founders Circle in the venture capital market. It provides an important part of the “capital stack” that startups need to access to go all the way to the finish line.