# kaal:claim:3962614-011

**Claim.** Because venture capitalists typically want to cash out their gains five to ten years after the initial investment, they play an active role in directing portfolio companies toward a merger, acquisition, or public offering, which can carry significant downsides for those companies and their products.

**Type.** mechanism  **Support.** argued

**Holds when.**

- VC backed portfolio companies approaching the exit window

**Source quote.**

> because capitalists typically want to cash-out their gains five to ten years after initial investments, they play an active role in directing the company towards a merger, acquisition, or public

**From.** Wulf A. Kaal, *REPUTATION AS CAPITAL – How Decentralized Autonomous Organizations Address Shortcomings in the Ventu* (2021), II.1.c) Cost of Deal Screening and Structuring, page 9

**Cite as.** Wulf A. Kaal, REPUTATION AS CAPITAL – How Decentralized Autonomous Organizations Address Shortcomings in the Ventu (2021). SSRN: https://ssrn.com/abstract=3962614

**Verify.** sha256 of source PDF `c6e202e77fd08db801f932774026458b94e5d103abf30cb1189fe6a1c5edf391` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202021%20-%20REPUTATION%20AS%20CAPITAL%20%E2%80%93%20How%20Decentralized%20Autonomous%20Organizations%20Address%20Shortcomings%20in%20the%20Ventu.pdf

**Failure mode.** Exit driven short termism  (family: short-termism)

**Topics.** risk-and-incentives, innovation

**Keywords.** short-termism, exit-pressure, portfolio-companies, venture-capital

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