Question: Have you heard of cases where companies buy back shares from a VC, much like buying back shares from a founder?
Our Take: Yes, but the situations usually aren’t pretty. If the company has the cash to buy back shares from the VCs (at their cost or above), then the company is doing well and it would be strange to see a VC wanting to sell their shares. Secondly, cash is “king” in startups and there are better uses for companies to make of their money.
Most likely the case is that the company is not doing well, the VCs want out and they are getting a fraction of their investment on the dollar. These are very distressed sales and usually one sees the company or its founders paying the cash and trying to take back the company to restart its efforts.
Note, there are some real serious legal issues regarding tender offers that one must concern themselves with with company-backed buy backs.