PerspectiveKane Hsieh Feb 04, 2013 Back to blog
From a WSJ article about Sycamore Networks:
Sycamore went public in 1999. Its shares more than quadrupled on their first trading day, valuing the company at $14 billion. At the time, it had booked a total of $11 million in revenue and no profits.
Last week, shareholders voted to dissolve Sycamore at a market value of $66M. One of our Fund V companes has booked over $11M in revenue without a profit. Imagine if we could take it public at $14B. We own 17% of the company - that's about $2.5B at a $14B valuation, or 11x our entire fund.
If you were a VC or an entrepreneur 1998-2000, you could get this way by doing deals like Sycamore, where a very modest degree of success led to astonishing wealth and returns. In a fund like ours the GP's would have shared about $500M in a deal like that, even though (at the time) the company had very little to show.
While it is our job to return on our funds, creating lasting, sustainable value is an implicit directive for all VCs - at least, for the ones that are truly passionate about technology. Those heady years serve as a warning for us to always take pause and think carefully in an industry that is by definition fast, competitive, and highly volatile.