Why It's Wrong To Say VC Firms Are 'Dumping' Facebook Stock When They Give It To Their Own Investors

Jim Breyer

Now that the first IPO lockup is over, lots of the venture capital firms that invested in Facebook while it was a startup are handing over their shares to their own investors. Called limited partners, these investors are made up of wealthy individuals, institutional investors, and endowments.

Fortune’s Dan Primack says Accel Partners, Greylock Partners and Meritech Capital Partners will hand over their Facebook stock to LPs.

We’ve read and seen reports characterise this transfer as a “dumping” of shares by venture capital firms, but it’s not, really.

The job of a VC firm is to invest in startups. Their job is to identify small, fast-growing companies and provide them the capital they need to turn into multi-billion winners.

As soon as those companies grow into liquid investments, the responsible thing for a VC firm to do is to hand over the stock to the LPs.

VC funds are not mutual funds. Their expertise is not in predicting how a public company’s stock will do on the public markets on a quarterly or annual basis. 

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