PE fund cycles and liquidation preferences distort private valuations and misalign founders
Private equity's fixed 6-8 year fund life forces exits at suboptimal times; private rounds often inflate headline valuations via liquidation preferences and ratchets that leave founders with nothing in downside scenarios, whereas public markets impose discipline (audits, reporting) but offer permanent capital, cheaper debt, M&A currency, and no mandatory sale deadline.
Permanent capital and debt markets enable buy-and-hold-forever model vs fund-driven exit pressure
Bending Spoons prefers permanent capital (evergreen structures) over 10-year VC/PE funds because it eliminates forced liquidation risk. They use debt markets (3.5x EBITDA) efficiently — lenders are surprisingly visionary but rigorously downside-focused — and raise equity mainly for employee liquidity, minimizing dilution (~10% total).
Liquidity contraction driving tender offers — IPOs dead below $1B, PE buyouts narrowing
Public markets are effectively closed for sub-$1B ARR companies; traditional PE buyers (Thoma Bravo) are hyper-selective. This forces late-stage startups to run continuous tender offers and secondary programs to provide employee liquidity, creating a new compensation norm (CROs negotiating annual 20% share sales).
Secondary markets at 70 cents on dollar reveal private mark overvaluation post-2021
Many 2021-vintage companies with low GDR and low growth trade at 70% of marked value in secondaries; fair value for such profiles is 3-4x revenue (e.g., low-single-digit growth + 80% GDR), far below prior marks.
The eight leading private companies (SpaceX, Stripe, Anthropic, Databricks, Revolut, ByteDance, Anduril) span internet, AI, fintech, space tech and defense, collectively worth nearly $4 trillion and outperforming the Mag 7, forming an index Laffont would hold for 10+ years.