Ackman: Complex Venture Preference Structures Hide Inaccurate Late-Stage Startup Valuations
Bill Ackman · #82 Bill Ackman: Getting Back Up · Apr 28, 2020 · at 39:07
Pershing Square founder Bill Ackman discusses structural misalignments and valuation distortion in venture capital with Shane Parrish.
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“And so the incentive on the part of many of these sort of earlier stage funds is to have markups in the portfolio, because it's a way of showing to your investors that you're making business progress. And I think it does encourage, you know, certain kinds of behavior that's not ideal. And a lot of this dynamic between the desire for the early venture fund investors to, you know, show a markup to their underlying investors and the desire for a new investor to come in, you know, at the lowest possible valuation. And the way those issues are generally solved is by creating these sort of funky securities that give the later investors, you know, preferential rights over the earlier investors. And I think a lot of times those features are not accurately Considered and valuing different, you know, round A versus round C or D.”
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