Hybrid VC: The Preemptive Buyout

by Sam on February 25, 2008

A week or so ago on Techcrunch I came across this post:
hybrid VC model early preemptive buyout venture capital techcrunch

It got me thinking to another variation of a hybrid VC model that could be used. A  VC could conceivably invest in “good scouts� who could scour the trenches for really promising upstart technologies. A VC could then get in early enough to buyout the technology at a great price and swap out the team with a pre-assembled all-star team.

This all-star team and product would then be owned entirely by the VC firm (or with some equity split) could then see the company through to a major buyout. The key would be to identify technologies that are a good fit within certain conglomerates, say a technology likely be snapped up by a Google or Microsoft.

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  • I've often read that if you are building a company with the intention to sell it, things might not work out as well as you would like it to. It also seems like a considerable amount of risk for one VC firm to expose itself to.
  • @ harshjshah Yes, never build a company with the intention of selling...although an exit strategy is pretty darn important these days especially since we are not in an IPO market.

    That said, I was not suggesting that companies look to sell. I was suggesting that VC's look to acquire early. If a VC can get in before something launches they could get away with a steal


    On Mon, Feb 25, 2008 at 8:10 PM, Disqus
  • Ralph
    Hi Sam,
    Safeguard Scientifics did something like this...invested, negotiated future buyout terms, brought in management if needed. They did Novell to very great success!
    Best wishes, Ralph
  • Hey Ralph!

    Thanks for the info. I'll do some Google searches for this and post
    the results in the comments.

    How are you doing?

    Sam

    On Tue, Feb 26, 2008 at 5:50 AM, Disqus
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