Should venture funds distribute shares once a public position unlocks, or hold them?

Pat Grady · Jul 8, 2024

Doing real work to form a point of view on where a public company can go from here, rather than distributing programmatically, can generate materially larger returns

Square went from a couple hundred million dollar gain at IPO to a multi-billion dollar gain five years later; Mongo compounded near 40% post-IPO; Sequoia made over a billion dollars more than a co-investor in Palo Alto Networks from an identical ownership position purely by being more patient

Scope: having a point of view doesn't necessarily mean outsmarting the public markets; it only sometimes pays off

47:54 20VC: The Sequoia Investment Process | Investing Lessons from Doug Leone, Roelof Botha & Alfred Lin | Sequoia's Framework for Analysing Founders | The True Benefit of Having Sequoia on a Cap Table & Sequoia's Biggest Threat with Pat Grady

Harry Stebbings · Jan 6, 2025 · hedged

Bessemer selling its entire Shopify stake at a $2-3B valuation was probably the worst financial decision ever made

A company going from $2B to $6B is much easier than generating another $4B of enterprise value across the rest of the portfolio, and it can happen quickly

Scope: offered as intellectual jousting against Maples' selling framework

30:04 20VC: How To Do a 10x Seed Fund in 2025 | Three Frameworks to Evaluate Startups an Founders | Lessons from Losing Billions Missing Airbnb and Pinterest & Investing Lessons from Charlie Munger with Mike Maples @ Floodgate

Harry Stebbings · Mar 10, 2025

Selling all public positions immediately at lockup expiry would massively damage venture returns

Cases like Salesforce show the compounding you forgo by exiting at lockup

68:12 20VC: Lessons from Investing $2BN and Returning $8BN in Cash | Why Most Venture Partnerships are Broken | We Sold Salesforce Early and Lost Out on Billions | Are The Best Deals Always Expensive and Competitive with Jake Saper @ Emergence Capital

Harry Stebbings · Mar 28, 2025

Selling winners early is very costly because venture is a power law game — funds that exited at IPO left billions on the table

An Emergence GP showed how much more they'd have made holding Salesforce past IPO, and Bessemer lost billions selling Shopify at IPO

Scope: figures cited approximately

28:23 20VC: Why Traditional VC is Broken: How VCs Learned Nothing from 2021 | Why LPs are More Important than Founders & Advice to Emerging Managers | Bull Case for Bytedance & Why TikTok's Ban Doesn't Matter with Mitchell Green, Lead Edge Capital

Immad Akhund · May 12, 2025

He'd rather hold long-term in compounding companies than sell secondaries, even if it means waiting fifteen years instead of ten.

He doesn't need the money and is in it for the game; if a company can become a $50B outcome, the extra years of holding are worth it.

Scope: concedes he should probably have taken more off the table when SoftBank offered a secondary

21:22 20VC Exclusive: Mercury Founder Launches First $26M Fund | Why Founders Should Take the Highest Price | Why Serial Entrepreneurs are Better | Why AI Is So Overhyped | The Future of Venture Capital with Immad Akhund

Byron Deeter · Aug 25, 2025

Bessemer was wrong to distribute Shopify when it did and should have held on

Many LPs are mandated to sell shortly after receiving distributions, which left a lot of money on the table given the subsequent run-up

Scope: they distributed rather than sold, giving holders the choice

54:11 20VC: Do Margins Matter in AI? | Is Defensibility Gone For Good? | Is Vertical SaaS Dead in a World of AI | What SaaS Rules Are BS and No Longer Apply in a World of AI | The Future of Venture: Why Chanel vs Walmart is BS with Byron Deeter

Roger Ehrenberg · Feb 19, 2024

Selling TTD to lock in the franchise-making return was the right trade even though holding could have returned another 5-10x of the fund

The downside regret of blowing a franchise-making outcome if the stock crashed outweighed the upside opportunity cost of holding

Scope: applies when valuations look divorced from objective reality

46:41 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital

Shardul Shah · Sep 16, 2024

Investors are rarely congratulated for correct distribution decisions but get calls whenever a decision temporarily looks wrong, so you shouldn't lose sleep over short-term price moves once you're confident the decision was right

He distributed an entire ~$1B acquisition position immediately; the stock spiked and he got calls, then it tanked and he got none

41:36 20VC: Index's Shardul Shah on Why Market Size is a Trap | Biggest Lessons on Pricing from Leading Rounds in Wiz & Datadog | Why Benchmarks & Averages in VC are BS | How Index Makes Decisions and Why Growth & Early are the Same Investing Style

Mike Maples · Jan 6, 2025

Selling Lyft at around $75 post-lockup was the right risk-adjusted decision even though holding would have returned more

You never make a trade you don't somewhat regret; once the fund is in the carry and in the money you still retain upside, so locking in the return is right on a risk-adjusted basis

Scope: risk-adjusted, not absolute-return, basis; applies once the fund is already in the money

30:32 20VC: How To Do a 10x Seed Fund in 2025 | Three Frameworks to Evaluate Startups an Founders | Lessons from Losing Billions Missing Airbnb and Pinterest & Investing Lessons from Charlie Munger with Mike Maples @ Floodgate

David Tisch · Feb 27, 2023

A venture fund should distribute public stock rather than try to time public markets on behalf of its LPs

LPs are perfectly capable of making their own public-market decisions and he doesn't presume to know better

Scope: described as an easy lesson; the in-between private secondary cases remain gray

43:45 20VC: How Multi-Stage Funds Changed The Game For Seed Rounds, Why Signalling Risk is BS, The Three Most Important Variables for Founders When Raising Rounds & A Debate on Portfolio Construction: Does Ownership Matter with David Tisch

Cem Sertoglu · Nov 20, 2024

Once a company is public, early-stage investors have lost their edge and should hand the hold-or-sell decision to their LPs, including via in-kind distribution

The insight that gave them an edge no longer applies in public markets, so the decision belongs to LPs who may prefer shares over cash

Scope: executed without impacting the share price

46:12 20VC: Turning $16.5M into $2.1BN; Lessons from the Greatest Venture Investment in European History: UiPath | Why VC is Not Being Commoditised | Why Price Does Not Matter | Lessons on Loss Ratio, Selling and Signalling with Cem Sertoglu

Max Altman · Nov 21, 2025

Once a position becomes liquid and the lockup ends, a VC's job is to distribute rather than hold

Scope: applies once shares are liquid and lockup has ended

24:27 20VC: Max Altman on The New Seed War: Can Anyone Compete with Sequoia and a16z | Leaving $2BN on the Table with Reddit | Lessons from Backing Rippling at $25M Post | Why Climate Tech is a Mirage and Disaster

Hemant Taneja · Sep 22, 2025

A venture firm should hold public positions until it has captured enough value rather than distributing early, because LPs' private sleeves are mandated to sell stock as soon as they receive it

LPs' private teams are programmatically told to sell stock on receipt, so distributing early just converts the position to cash at whatever price it happens to be; the decision should also turn on whether the firm's continued time on the company will still compound value

Scope: applies to companies where GC's ongoing involvement still matters; framed as a judgment about LP behavior, not a claim of superior skill

58:57 20VC: General Catalyst CEO Hemant Taneja on The Future of Venture Capital: Chanel vs Walmart | Lessons Scaling GC to $40BN in AUM | Investing $5BN+ Into Stripe Over 14 Rounds | Investing Hundreds of Millions into Anthropic at $60BN Valuation

Harry Stebbings · Nov 21, 2025

Holding a public position rather than distributing can be a favor to institutional LPs, because many have auto-sale policies that force them to sell on distribution even when they don't want to

Those LPs aren't allowed to hold the stock once it is distributed to them

Scope: applies to institutional LPs

22:34 20VC: Max Altman on The New Seed War: Can Anyone Compete with Sequoia and a16z | Leaving $2BN on the Table with Reddit | Lessons from Backing Rippling at $25M Post | Why Climate Tech is a Mirage and Disaster

Mike Lazerow · Aug 2, 2021

His biggest investing mistake has been selling too early; the right approach is to hold winners and keep putting more money into the great ones

Looking back at deals where he took money off the table — Salesforce stock, Braze — it was a mistake; the instinct to recycle personal capital led him to sell too soon

Scope: framed as lessons from investing his own money

38:13 20VC: Mike Lazerow on Why How You Operate As a VC Is More Important Than Who You Are and What You Have Done, Why Boards Are More Important for the Entrepreneur than Investor & How The Best Entrepreneurs Prep Their Boards & Extract Value From Them

Avichal Garg · Apr 11, 2022

The ability to sell early is as much a curse as a blessing, because investors' dominant mistake is selling too early rather than too late

Human cognitive bias: primates can't intuit large numbers or exponential growth, so our intuitions about businesses with billions of users compounding exponentially are badly wrong; holding on would often have produced another 5-10x, which is why Sequoia moved to a new fund structure

26:41 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital

Larry Aschebrook · Jun 16, 2025

The right objective is velocity of capital — a 2x net cash return in five years — rather than chasing MOIC, and managers should distribute cash not shares

LPs blame the manager if they're left holding distributed shares

Scope: specific to G Squared's secondary strategy

56:47 20VC: How We Made $800M on Coursera | We Lost Money on Uber and Made Money on Lyft | We Did 3x on Postmates in 18 Months | DPI is King, MOIC is BS | We Dodged Theranos and I Still Lost Millions with Larry Aschebrook @ G Squared

Miles Dieffenbach · Aug 4, 2025

Managers should distribute cash rather than stock to LPs.

Stock distributions create a time lag between when the LP sells and when others sell, producing a 1–2% pricing discrepancy, whereas a manager selling the whole book and distributing cash treats all LPs equally on day one.

19:02 20VC: Inside Carnegie Mellon's $4BN Endowment | Why 90% of LPs Shouldn't Invest in VC | The $140BN Problem with Multi-Stage Funds | The Hidden Math Behind DPI, TVPI, and Illiquidity with Miles Dieffenbach

Danny Rimer · Jun 17, 2024

The partner closest to a winning company should get only one vote, not the deciding vote, on when to exit

It guards against the trap of assuming past success guarantees future success and keeps the sponsoring partner honest

Scope: acknowledged as a very difficult discipline

35:01 20VC: Index's Danny Rimer on Investing Lessons from Hits like Figma, Discord and Etsy to Missing Snapchat, Airbnb, Facebook & Spotify | Why Valuation is a Trap and Market Sizing, Signalling and Sector/Geo-Specific Funds are all Noise

Shardul Shah · Sep 16, 2024

Investors holding post-IPO positions are prone to rose-tinted delusion about continued appreciation, so hold/sell decisions should be made by a group with guardrails rather than by an individual

It is so rare to see a company go from investment to public that people assume the run will sustain; a group with agreeable disagreement gets to a better decision

Scope: describes Index's own process

42:30 20VC: Index's Shardul Shah on Why Market Size is a Trap | Biggest Lessons on Pricing from Leading Rounds in Wiz & Datadog | Why Benchmarks & Averages in VC are BS | How Index Makes Decisions and Why Growth & Early are the Same Investing Style

Jake Saper · Mar 10, 2025

Emergence's active case-by-case management of post-IPO positions has been a meaningfully value-additive skill, adding roughly $2BN versus selling everything at lockup

Their internal analysis showed selling at lockup would have returned $2BN less to LPs, while perfect peak-price selling would have returned $2BN more

Scope: excludes Salesforce because it was long ago and a bad decision; covers the currently public stocks over roughly the past five years

68:18 20VC: Lessons from Investing $2BN and Returning $8BN in Cash | Why Most Venture Partnerships are Broken | We Sold Salesforce Early and Lost Out on Billions | Are The Best Deals Always Expensive and Competitive with Jake Saper @ Emergence Capital

Max Altman · Nov 21, 2025

Funds should decide whether to hold post-IPO positions case by case in conversation with anchor LPs rather than defaulting to distributing at lockup expiry

Selling Reddit at $9B versus today's $39B left roughly $2B on the table, and that gap is the difference between a 5x and a 15x fund

Scope: revises his prior view that distributing at lockup was simply the right call; acknowledges VCs are not public market investors and LPs asked for distributions

21:53 20VC: Max Altman on The New Seed War: Can Anyone Compete with Sequoia and a16z | Leaving $2BN on the Table with Reddit | Lessons from Backing Rippling at $25M Post | Why Climate Tech is a Mirage and Disaster

Mitchell Green · Mar 28, 2025

Getting to 1x faster matters more than maximising a single winner, because a fund that returns capital quickly can grow assets and stay in business

Emerging managers need to raise funds two, three and four; they don't have Bessemer's eighty-year balance sheet, and for every Shopify held there were billions lost in 2021 by not distributing

28:58 Returning capital to 1x dpi faster matters more than maximizing a single winner for emerging managers

Mamoon Hamid · Oct 21, 2024

Distributing stock rather than holding is the right default for a GP, because when you return 5-10x a fund on a legendary company both LPs and GPs are happy, and they retain the option to keep holding the shares themselves

You will always wish you had held for a few more multiples, but the holding decision is preserved for LPs and GPs individually — John Doerr has held his Google stock for twenty five years

27:38 Distribute stock not hold preserves individual holding optionality for lps and gps

Rick Zullo · Aug 23, 2023

Managers who ran lots of SPVs on the way up and never took liquidity on their one big winner are in serious trouble with LPs

A company that was worth $3-5B can now sit under $600M of preference and be worth nothing, so LPs who were pitched SPVs got no fund returns

23:52 Spv driven managers who never took liquidity face lp reckoning

Cem Sertoglu · Nov 20, 2024

Venture investors' informational edge decays after IPO because tech moves too fast, and staying an insider on the board actually reduces your ability to manage the position

Whatever asymmetric insight you hold at IPO starts decaying; remaining an insider makes you effectively a long-term founder, which conflicts with a fund's fixed lifetime that forces divestment anyway

47:58 Staying a board insider post ipo reduces rather than helps position management

Beezer Clarkson · Oct 18, 2023 · hedged

The list of managers who have enough LP pull that LPs will back them regardless of liquidity decisions is getting smaller, and the names on it are changing

LPs are now scrutinizing whether a manager had a cogent reason for not selling, and whether they behaved as the kind of fiduciary the LP wants to be associated with

36:46 Lp tolerance for managers ignoring liquidity discipline is shrinking to a few elite names

Miles Dieffenbach · Aug 4, 2025

The last generation of managers clearly did not do a good enough job selling in the 2021–22 vintage, though their decision to hold was defensible given public comps at the time.

For an eighteen-month period public markets priced growth assets at ~20x ARR median and 40x for top-quartile growers, so models and public comps supported holding for 2–3x more value in three years — then conditions changed very quickly.

19:26 2021 22 vintage managers under sold though holding was rational given contemporary comps

David Frankel · Oct 14, 2024

Distribution policy should be set by position size relative to fund size: large, fund-moving positions get distributed in kind and left to the LP, small positions get sold and distributed as cash

LPs have divergent preferences (foundations want shares, others don't want to make the call), so size relative to the fund is the workable decision rule

38:09 Distribution policy should scale with position size relative to fund

Danny Rimer · Jun 17, 2024

Public-market exit decisions should be based on valuing the company today rather than optimizing for what you believe it will be worth next year

If you still like the stock you can keep or buy it back personally, but the right decision for LPs is made on present value

36:18 Value the position today rather than future belief when deciding to sell

Danny Rimer · Jun 17, 2024

Index's biggest exit mistakes have been holding too long rather than selling too early

On balance across cases, losses came from holding too long; Etsy is the counterexample where they sold too early

36:54 Holding too long not selling too early is the more common costly mistake

Harry Stebbings · Nov 21, 2025

Advice to hold public positions suffers from survivorship bias: podcasts highlight the winners while ignoring the many companies that stay flat or fall for a decade

The companies that stagnate for ten years after listing are not the ones discussed publicly

24:38 Hold advice is survivorship bias

Jake Saper · Mar 10, 2025

A venture firm only has a defensible reason to hold a public position if it retains inside information through an active board seat

Without board-level inside information you have no informational edge over the market, so holding is indefensible; with it you can update the partnership quarterly and decide to hold, sell or buy

65:52 Holding public positions is only defensible with continued board level inside information

Jake Saper · Mar 10, 2025

Endowment and foundation LPs are not pressing for near-term cash and would rather the manager maximize the size of the eventual outcome

The vast majority of Emergence's investors are big charity foundations and endowments who trust the firm given $8BN returned on $2BN deployed

66:54 Endowment and foundation lps prefer maximizing eventual outcome over near term liquidity