How does this help the VCs liquidate?; i.e. if the IPO market got killed in favor of such deals, wouldn't that discourage venture capitalists from making investments?
Why would a VC care if later rounds of funding came from an IPO or through Private Financing, as long as they were able to liquidate.
What I think is cute, is that with Second Market, Sharespost, and others, we're seeing "collectives" or "partnerships" raise money from the private investors, and then purchase private stock.
For all intents and purposes, these private companies will now have thousands (or tens of thousands) of investors, as represented by a few very large partnerships.
Unlike Google, these private companies won't exceed the 500 investor limit, won't have to go public, will allow employees to liquidate - and the only organization that is hurt will be the SOX auditors who don't get a new public company to audit.
