I think that last sentence might be misleading. VCs very much do aim for eventual liquidity. In a very few rare cases, the obvious success of a portfolio company may allow them to defer the need for liquidity (when Goldman is creating new funds just to get itself into Facebook, there's probably no pressing need for a VC to get out of Facebook), but the underlying need is still there.
I've read enough about the economics of VC funds to understand why this is, but I've also witnessed it firsthand. Unless you are setting the world on fire, your VCs don't want to sit on your board for 6 years, and will press for an exit.
This is something that challenges me about your analyses; you evoke Microsoft and Google and Facebook. If you're Facebook, all bets are off. I hope the Airbnbs do become as big as Ebay, but very few of the companies you help start are going to achieve that bracket of success.
Sure, if a company isn't going anywhere, VCs will start to consider Plan Bs. Everyone considers Plan Bs when a project turns out badly. But getting acquired is always a Plan B. And when you talk about someone's "aim" when doing things, you're talking about Plan A.
Saying VCs aim to sell companies is like saying that if I try as hard as I can to get an A in a class and get a B, I was aiming to get Bs. That is just not what the word "aim" means. It's more like I accept the inevitability of Bs, since As are hard to get. Similarly, VCs accept the inevitability of acquisitions, because IPOs are hard to get.
In accordance with my new principle that once I have to start talking about the definitions of the words I'm using, the thread is doomed, I'm done now.
Paul, you're winding up in these "having to start talking about definitions" situations because you choose to describe businesses that produce millions in profits every year as "not going anywhere". At my very last job, I saw a company doing mid-8-figures profits experience pressure to exit. Pressure to exit later in life is a real hazard of accepting VC, just as pressure not to exit early in life is as well.
You don't, by the way, need to announce that you're "done now". That's passive-agressive. You can just "be done".
LPs care about IRR and liquidity. That causes VCs who are concerned about satisfying their LPs to also care about fund IRR and liquidity.
Sometimes, there is a tradeoff between liquidity and IRR. Groupon could have sold for $6bn, or perhaps they could IPO at $15bn. There, the board members decided that the prospect of improved IRR exceeded the delay in liquidity.
It's not an accurate representation to state that VCs only care about liquidity when a company isn't going anywhere: given that it's a tradeoff, and that liquidity has heightened importance the older the fund, VCs will push for liquidity even in investments in companies that are certainly doing better than "not going anywhere". The IRRs might be good, but their LPs may really want their money back after ten years, and are willing to sacrifice the IRRs to such an extent that a pretty good return just isn't good enough.
I've read enough about the economics of VC funds to understand why this is, but I've also witnessed it firsthand. Unless you are setting the world on fire, your VCs don't want to sit on your board for 6 years, and will press for an exit.
This is something that challenges me about your analyses; you evoke Microsoft and Google and Facebook. If you're Facebook, all bets are off. I hope the Airbnbs do become as big as Ebay, but very few of the companies you help start are going to achieve that bracket of success.