Can Private Equity Rescue Startups?
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Investors have driven up the shares of the hottest tech startups in the land and sent their valuations — on paper, at least — into the stratosphere. Uber is now valued at $41 billion! Airbnb could be worth$20 billion! Snapchat is pushing for $19 billion! Palantir and SpaceX are already worth more than $10 billion each!
Headline-grabbing valuations are usually an illusion, of course. Investors who buy late in the venture game generally demand preferred shares that, as the name suggests, come with perks and protections that lessen (or eliminate) the risk of losing money on expensive shares. If the company is sold for a modest sum rather than a windfall, later stage investors get more, earlier investors get less, and employees — who have common stock, not preferred — get comparatively little or nothing at all…
Can Private Equity Rescue Startups?
