Founders often structure financing rounds with the dual objective of funding the company and achieving liquidity. For many, this involves a private equity (PE) firm entering the capital table and the company's board through the acquisition of primary and secondary shares from the founder.
The PE firm, despite having no involvement in the company's success thus far, enters with a specific agenda that may not always align with the founder's goals or the firm's priorities. It is widely recognized that the PE firm needs to transact by selling its shares or the entire company within three to four years, and the founder tacitly agrees with this agenda.
In practice and based on our experience, the introduction of private equity participation alters the chemistry and alchemy that led to the initial success, sometimes for the better, but not always. We think there is a better approach, to combine patient capital with founders without changing the business or the things that make it successful.
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