Peter Rip of Crosslink Capital discusses what venture capital can teach corporate America:
- Finance Growth With Equity, Not Debt
In a study surveying 30 years, researchers found that companies started when credit was difficult to obtain had better odds of long-term survival than firms started under more liberal credit environments. - Owners Act Like Owners, Not Employees
The spread between chief executive and rank-and-file salaries is usually a fraction of what it is in public companies. Senior executives have equity ownership, and it is their long-term compensation. Incentives between owners and managers are aligned because they are the same people. - Accountability Is Everything
Unlike in public companies, boards of venture-backed companies have no reluctance to replace C.E.O.’s or key managers when things aren’t working. “Wait until next year, again” is not tolerated because the companies cannot afford it. Cash is king. - It’s About Capital Efficiency
Our job is to allocate equity capital to the best and let go of the ones that are less efficient. Our job is to allocate equity capital to the best and let go of the ones that are less efficient.