In this week’s episode of the Download strictlyVC Podcast, veteran VC Aileen Lee was immediately over a large consequence of the recent tree-and-bust cycle: many companies that remain in the dark do not only struggle to get their foot back after collecting too much money in the event of non-sustainable ratings; They also lost the champions they once supported.
Lee discussed how limited partners hesitate to criticize powerful fund managers, for fear that they will be excluded from investing in those companies. But she imagined one thing that they would say if they could speak freely:
“Everyone wants to go to X Brand Name Fund, and so they will never criticize them [for fear of repercussions] . . . They probably talk about us behind our backs [laughs]…. But what they would say is [that] All people who have [were] Acquired at these venture companies during the ZIRP era. . . They have made a lot of worthless investments ”and now they become elbow – except that it is too late, Lee observed. “All [the LPs’] Money was actually just thrown into the drain because the people in the venture were not long enough to see if the companies were successful. “
It is not the fault of these newer investors, Lee continued. “Only a lot of people were not trained and did not get a mentoring or internship to get checkbooks, and many investments were made, and. . . There are many orphan companies, “as a result.
But there is another reason why startups are left to their own devices “and I think this is crazy,” said Lee; In many cases, companies are made by a more senior general partner “that led the investment – which is still there [at the firm] But just stopped appearing the board meetings. ‘
For certain companies it has been happening for years at the moment. Nobody did just as much due diligence during the Go-Go Covid era of financing, and the corner cutting was never completely stopped when it came to the same investments. But it is also an important reason why a growing number of companies have difficulty finding the help of external in exit strategies, and why LPS would be justified in expressing more frustration.
As another old VC, Jason Lemkin told this editor at the end of 2022 when VCS first stopped with the board meetings of Startups that momentum lost: “[S]Would there be no checks and balances? Millions and millions are invested by pension funds and universities and widows and orphans, and if you do not do it on the way inside, and you do not do a continuous diligence during a board meeting, you have some kind of your fiduciary responsibilities for your LPS, right? “
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