How Do You Solve a Problem Like Patzer?
It was with bemusement that I read how Mint.com founder Aaron
Patzer has just been “verbed.”
The story goes that when Mint.com sold to Intuit for $170 million, they left way too much money on table because the company clearly had the opportunity to go for the billion dollar plus win. This leads to what is now called the Patzer Problem, namely:
When companies sell for ~$100 million, and a much bigger outcome is possible, it is very bad for investors.
I understand that. For many venture funds, that size exit certainly doesn’t get close to making the fund successful.
But let me propose a corollary to the Patzer Problem:
For a normal homo sapiens, a ~$100 million exit is a life changing event.
There are certainly some founders who want to go big. Those that have already had a smaller win are often not interested in another smaller win. Other folks are just predisposed to continue building their company instead of selling it and being beholden to a different set of shareholders. There are a whole group of founders who truly believe that they want to build a huge company right up to the point that they get that ~$100 million offer and begin thinking through the math. But many are perfectly happy with a life changing event. And I love them all.
I see the world rather simply. Venture capital is like any other business. We have customers (founders) and we have shareholders (limited partners). Our job is to increase shareholder value, i.e. create an outsized return to our limited partners. The way that we do this is by delighting our customers. Our products include ourselves and our experience, our connections, and the structured value we can build around the portfolio, among other things.
For the record, the Mint.com exit was profoundly successful for us. If we are doing things right and our company founders are successful, then over the long run we should be successful. If we get to the point where our founders are successful but we can’t be, we should be rethinking our business.
