Thursday, July 07, 2011
Another example that some of the best ethnography appears in the business sections of major papers. This NY Times article by Steven Davidoff contrasts the values and modus operandi of venture capitalists with those of private equity. Though the terms are often used interchangeably, the difference can be important. The VC are Silicon Valley based, and form a community, so share the spoils. The PE are typically NY based and take over companies to restructure them, or make them run better, before they re-sell them. Often they sell them highly leveraged, or the profit comes out of tax breaks and other accounting shenanigans, which is why many are critical of PE. In the case of Silver Lake selling Skype that is discussed in the article, Silver Lake as a PE could not care less whether they are liked or not, so will not spend the $1 million it would take to allow employees who have left Skype to cash in their options. On a $4 billion deal, they could afford to make this problem go away. But they are PEs, so they don't care; VCs would have, since you never know who you'll have to work with again in Silicon Valley. Great article.