What Did the Venture Firms Know?
The strongest evidence that many venture firms knew companies they were pushing into IPOs were not ready for the public market is the change in how venture firms viewed IPOs during the bubble. In essence, the IPO went from a financing event to an exit event (a so-called liquidity event).
It used to be that a venture firm thought of an IPO as one of a sequence of financing events for a company. The purpose of the IPO was to provide money for the continuing growth of the company; it was a critical event in building the company, not the end of building the company. The venture firm hoped to exit its investment profitably after a significant lag from the date of the IPO.
Had the purpose of an IPO been to raise money ...
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