Why Groupon, Twitter & Other Hot Private Companies Are Cashing Out

Early shareholders in the hottest privately-held technology companies are increasingly finding liquidity without an acquisition or a public offering, with Groupon Inc. being the most recent example. The daily-deals company is using $344 million of a fresh $500 million funding round to buy shares from insiders.

Prominent Internet companies like HomeAway Inc., Kayak Software Corp., Twitter Inc. and Zynga Gaming Network Inc. have held similar nine-digit funding events that gave founders some pocket money until the big exit. And one investor has popped up in all of those big raises: Institutional Venture Partners.

IVP General Partner Todd Chaffee, who led the firm’s deals in HomeAway, Kayak and Twitter, spoke with Venture Capital Dispatch about why he thinks venture and private equity investors will continue to be a source of liquidity. “These companies are a different animal than we’ve seen before,” Chaffee said. “They’re scaling quickly, but they’re profitable. I think the key message is it doesn’t drive companies towards premature liquidity. It helps them hit for the fences.”

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