Is all Fair in Love, War and VC Deals?


For years people have been complaining that the enormity and power of hedge funds has distorted the stock market, making it nearly impossible for individual investors to succeed.

Well this same notion of ’market manipulation’ may have arrived in the Venture Capital land and if it’s true, everyone better be worried ’“ especially entrepreneurs.

Fucked Google has an article stating that Sequoia, the ones who invested in YouTube (and Google) stands to make over $509M off its six month, $11 million dollar investment in YouTube.

This profit is nearly twice the amount made by either of the YouTube co-founders. This begets the question: why didn’t the founders sell directly to Google and keep all the equity themselves?

Fucked Google suggests that Sequoia essentially manipulated the deal ’“ had YouTube gone directly to Google, Sequoia would have killed their chances. Plus, if Sequoia had then decided to launch its own video company incubated in-house, the new company would have been amply financially-backed to compete head-on and perfectly positioned to sell to Google; bye-bye YouTube.

The argument is whether or not YouTube’s founders were forced to pay Sequoia $509M in order to have their own guaranteed payday. Now that both deals are done and Sequoia doesn’t foresee selling any more of its portfolio companies to Google, everyone has decided to cash out entirely.

The reason all this trouble me is because it makes sense and doesn’t seem like some grandiose conspiracy theory fallacy. Entrepreneurship should be an empowering opportunity for anyone who is smart, creative and willing to kill themselves on 90 hour work week schedules. However, if it is now necessary to use a manipulative broker in order to see a true payday, I think there is a serious system flaw that needs correction and regulation.


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