One of the least scientific topics with the most degrees of freedom as a venture investor. But I’d rephrase the question: it’s not about stock distribution strategies, it’s about distribution strategies writ large. Because cash vs. stock has a decision-tree unto itself. https://twitter.com/bryce/status/1314393551485071360

Factors to consider: Have you demonstrated success as a firm? Have you generated an attractive return in the fund? Do your LPs care about timely distributions? At what stage do you invest, which can impact LP perception of how skilled you might be once an investment turns liquid?

When we had our first big exit opportunity @TheTradeDesk in Fund I, we sought to balance our belief about value with our desire to put up a significant win. We elected not to sell in the IPO at $18 because we felt price was low. But we had 2 demand registrations in our pocket.

This meant that we could request up to two registered secondary offerings with the company’s help, which we did a few months after IPO at $36 per share. We sold around half our position at this time, returning 1.5x net Fund I. This was arguably my most exciting moment in venture.

With this we accomplished two goals: monetized a true home run which was validating for the firm while generating a strong return for Fund I LPs. It was truly a game changer. And when they released their first earnings as a public company we did it again.

Our second demand registration yielded an additional 3x net for investors, securing a top decile fund while showing LPs that as a seed fund we could lead, help grow a category defining company and profitably exit. Heady stuff.

Part of the reason for distributing cash versus stock here is because: (a) we owned so much that distributing a like amount of stock to LPs would have cratered the stock as uncoordinated selling would have depressed value for everyone and (b) we wanted to secure the win - quick.

This was largely a function of this being our first big win and it being in our Fund I. At 4.5x net within 5 months of IPO we had changed the game for our firm, our fund and our LPs belief in our skill and our stewardship.

The remaining stub of stock we retained - ~7% of our original position - we distributed as shares over the subsequent two years at much higher prices. Why? Because the volume of our shares wouldn’t hurt the stock price even if our LPs all sold, and because WE WON so could wait.

This experience has altered the way we think about all opportunities for liquidity. We got out of TTD “hot” because the most important thing for our business and our LPs was to secure a big win within an acceptable level of risk. IPO at $750m, average exit value $2.25b...

...trading today at, yes, $28 FREAKING BILLION. Do we lose sleep over the fact that we’ve forgone 13x appreciation in the public markets? Honestly? Not a wink. We wanted to return a big win to LPs. We wanted to prove our worth. And our LPs don’t pay us to hold public stock...

...for long periods of time as a seed stage firm. We’re not Sequoia. That said, now that we’ve proven our ability to deliver both to our LPs and to ourselves, we’re much more comfortable letting big wins run than we were in our first fund with our first IPO.

Between TTD, DDOG and other good stuff, Fund I will be 10x + net. Nice. However, if these investments had been in Fund II or III, in all likelihood our returns would have been higher due to our comfort with letting great companies continue to compound value on our watch.

So at this point it’s really more about making decisions independent of “proving ourselves” and focusing on optimizing our views on value, timing and risk. This applies to the way we think about both secondaries and IPO stock. Each decision on its merits at that point in time.

What we’ve learned is that truly great companies can compound value at much higher rates and for much longer time periods than we could have imagined, heavily informing our view on Fund II companies and “room to run.”

So that’s what I’ve got. It’s very much an 80/20 get-the-big-things-right approach, trying not to be too cute and having conviction that we’re making the right decision at the time, no regrets.

And to @semil and the issue of distributing stock, it has to be done in amounts that won’t hurt the market if all LPs sell (almost) immediately (which many if not most do), and we do offer our general view without offering an opinion. Investors must act of their own accord.

But I’ll say for the record that I personally hold significant positions in both TTD and DDOG because I believe in the companies’ long term prospects. But I’m not a professional LP - they have to answer to higher ups as we do to them and fulfill their charters, read: to sell.