Peter Rip has an article in the NYT today called Another View: What V.C. Can Teach Corporate America. It has also generated some very good discussion.
Peter writes: “My industry uses a Darwinian process of capital allocation within and across companies to ensure the best ideas rise to the top. Corporate America, its public boards, and now, the United States government would be well served to take a few pages on governance from America’s venture capital-backed companies.” He offers a few nuggets: (a) Finance Growth With Equity, Not Debt (b) Owners Act Like Owners, Not Employees (c) Accountability Is Everything and (d) It’s About Capital Efficiency.
Commenters also have good points:
“The author offers an incomplete version of the VC playbook. VC capital is almost always covertible preferred which has the protection of debt with the upside of equity. Add liquidation preferences, anti-dilution protection, and other terms and the alignment of interests to common is not complete.
Start-ups tend to take several rounds of capital and are rarely self-funding from inception. So the comment, “they only grow by generating cash” is inaccurate for most start-ups.” – JHL
“While VCs have their good points – give me an hour and I’ll think of one – there are too many situations where a twenty-something narcissus tells management how to run the company.” – Ozymandias
And more. It’s a good read.
This segment is a part in the series : NYT