Re: Sourcefire makes big mistake

[Blue Boar <BlueBoar () thievco com>]

Fergie wrote:
>  http://en.wikipedia.org/wiki/Venture_capital
> -- "Dude VanWinkle" <dudevanwinkle () gmail com> wrote:
> whats a vc firm?

Sorry Dude, I was making too many assumptions about what people know. 
Near Silicon Valley here, everyone knows how venture capital works. ;)

Short version of the story: a high tech company needs money to develop 
their product.  VC firms are in the business of giving money to such 
companies, if they think there is a chance of success.  In order to 
protect their investment, they usually get some level of control over 
the tech company, get seats on the board, and have a say about replacing 
current executives and adding new ones.  And of course they now own some 
portion of the company, however much they paid for.  Usually in the form 
of stock.

Now, VC companies work by giving out lots of money to a lot of 
companies, and hoping for one spectacular success in many 20 companies. 
 That means that 19 companies will fail, and number 20 needs to make 
20+ times the investment.  About the only way the VC firm will get that 
kind of payback is if the company goes public, or gets acquired. 
Therefore, if you take VC money, they will drive your company towards 
that end.  And you may not fail all the way, the VC may eventually 
decide to cut their losses, a recover at least some of the investment. 
See: Counterpane.

                                        BB
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