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I think this is pretty standard in these deals. You'll see it in a lot of billion+ valuation rounds. The mutual fund or other late stage fund will take the small risk the IPO never happens, and live with illiquidity until then -- for a minimum guaranteed return (not a huge one, but a real one) plus the potential upside if the stock does better than expected.
It can be brutal in some cases (see, e.g. Chegg) but usually it has no material effect and comes with the territory.
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Why in all these deals are the Series A investors making a profit and Series B losing everything? Is the day of Series B seniority to Series A in the liquidation preference dead? I guess so.
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Money doesn't quit but Ego dreams bigger. Once Money gets its target return, if there's an acquirer -- it sells.
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This is really a terrific analysis. Just very solid.
The one thing worth adding though, is that as tough as it is -- 7-10 years; $100m in capital; 500+ employees; etc. etc. -- the markets are growing faster than ever, and because of that ... multiples are higher than ever.
That takes some of the sting out of it.
But if you're not up for a 7-10 year journey -- Do No Start a SaaS / Enterprise company ...
Really great post.
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