Chips Off The Old Block
I’ve been asked several times over the past few weeks (probably because we just sold a small part of Groupon to DST and Battery for $135mm), why I would sell stock in a company like Groupon that is clearly in the earliest stages of its growth and has yet to reach it full potential.
The answer is highly complex, and at the same time, remarkably simple.
lets forget the complex part which has to do with my father, the great depression, a company called Halo, Anthony Hopkins in the movie “Magic”, and a girl who broke my heart in high school.
The simple part is this – we don’t have much of a choice. Unlike a typical founder who might start a company and believe in it with such passion that they refuse to sell their stock, at any moment in time we’ve started 10 companies. On any given day, we’re holding hundreds of millions of shares of those company.
Now while you might say, “so what” any VC holds on to tons of private company stock and they often don’t sell off their positions over time. The distinction lies in the extreme nature of our position. We’re not just a VC. We’re part founder, part entrepreneur, part angel investor, part VC, part incubator, part late stage private equity investor, part consultant, and part operator; and the sum of all of those parts means that we typically own the vast majority of our companies, not a small percentage.
So if we didn’t sell down our position over time, we would end up needing to dump our stock into the market eventually and that could cause havoc not only for the company, but also on the price we were able to achieve.
As a result, from time to time, we sell off small positions in our companies. Sometimes we get a great price (when measured through a historical lens) and sometimes, we get a shitty price. We sold InnerWorkings stock at $1, it traded near $20/share before the collapse of the market in 08. We sold Echo stock at $2.88, we took it public at $14 a few years later.
That being said, I wouldn’t feel bad for us, we’ve been fortunate to sell off hundreds of millions of dollars of stock and that’s allowed us to keep doing what we do best – start and build great technology companies.
And as for Groupon, I’m not a prophet and I have no crystal ball, but given what I know today about the strategic direction of the company and its potential impact on social commerce, my guess is that one day the price at which we sold will seem insanely low.