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’Tis but a flesh wound! (Monty Python & The Holy Grail, 1975)

What happens when private equity buys your competitor?

Alex Taussig
Jun 3, 2016 · 4 min read

If you were on Twitter Wednesday morning, you may have witnessed a humorous exchange between Marc Andreessen and danprimack regarding the private equity takeout of Ping Identity:

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Marc’s obviously an investor in Okta, which provides identity management software for enterprises and competes with Ping. Presumably, he’s happy because Ping will be easier to compete with under private equity ownership.

To understand why, it’s worth discussing briefly how venture capital firms like Andreessen Horowitz (and my firm, Lightspeed, for that matter) invest in tech companies, compared to our colleagues in the private equity world.

How VC and PE differ

First, a disclaimer — I’m taking a broad brush here. Venture capital (VC) and private equity (PE) do overlap from time to time. VC firms occasionally do PE deals (e.g. AH and Index buying Skype from eBay alongside PE firm Silver Lake), and PE firms occasionally do VC deals (e.g. TCV backing Rent the Runway). Like most generalizations, the below do not universally apply.

That said, VC and PE deals tend to differ in several key ways:

How PE ownership changes your ability to compete

Given the above characteristics of a PE-backed business, a VC-backed competitor has a few key advantages:

So, while your competitor may be far from deceased…

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…there is some reason to rejoice when a private equity firm buys your rival. You are indeed better positioned for success as a result!

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Lightspeed Venture Partners

Lightspeed is a multi-stage VC firm focused on accelerating…

Alex Taussig

Written by

Partner at Lightspeed. Boards: AWA, Daily Harvest, Faire, Forage, Flockjay, Outschool, Zola. Prior: thredUP, RentJuice/$Z, $TWOU, $CBLK. Writes firehose.vc.

Lightspeed Venture Partners

Lightspeed is a multi-stage VC firm focused on accelerating disruptive innovations and trends in the enterprise and consumer sectors. In the past two decades, Lightspeed has backed 400 companies and currently manages $10.5B across the global Lightspeed platform.

Alex Taussig

Written by

Partner at Lightspeed. Boards: AWA, Daily Harvest, Faire, Forage, Flockjay, Outschool, Zola. Prior: thredUP, RentJuice/$Z, $TWOU, $CBLK. Writes firehose.vc.

Lightspeed Venture Partners

Lightspeed is a multi-stage VC firm focused on accelerating disruptive innovations and trends in the enterprise and consumer sectors. In the past two decades, Lightspeed has backed 400 companies and currently manages $10.5B across the global Lightspeed platform.

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