With few exceptions the VC and Private Equity firms are about making money and selling out to someone else. They could care less about what state they leave the company, customer's, or employees after they have recovered their initial investment and a targeted profit.
I remember the VC that ran a start up I was in dismiss a question about profitability another employee naively asked about at an all hands. He explicitly stated that the VC didn't consider profitability of our company a measure of success. Basically saying that as long as the VC profited by reselling their ownership for more than they had invested, the VC would be happy.
There are numerous destructive mechanisms that have been used by private equity to make large amounts of money at the long term expense of everyone else involved. The classic example, buying a company that has cash reserves and low debt, they then take over as corporate officers, and start approving ridiculous consulting fee payments to the VC firm or just cash distributions to the investors, then when the target company's cash runs out, they start taking out large loans on the companies assets to keep up the payments to themselves. At some point the company is so saddled in debt it is unviable and the VCs wash their hands and shut things down.
Another interesting example I recent read of is that some private equity firm basically bought all fire truck manufactures in the US. Jacking up the pricing to municipalities for new trucks while at the same time not supplying spare parts. Great for the VC. Bad for every city in the country.
Last edited:
