We plan to be long term holders, eventually taking the company public. We look at Constellation Software up in Canada (where Allan is based) as a great model. The entrepreneurs often stay with the company since they know the customer and product better than anyone. Then with shared resources, best practices, and talking to their peers they can grow their business.
Forgive me for my naivety, but whats the point of the founders staying when you're taking out almost all the potential upside for them by acquiring them? Surely if they believed in the ability for their company to succeed long term they'd stick by it without taking an acquisition early. If your advantage is capital and experience, why would they not just go for a debt based option like clearbanc and retain their potential upside?
Clearbanc and others super useful to help short term cash flow, but its tough to get enough money out to take money off table (a lot of founders have a chance to take money off to go buy a house etc...). For example one of our portfolio company was started by 4 guys with $20K, and we just were able to pay them $4M, and then if they keep growing it they get more upside. One of the ways to grow is to increase the inventory and then increase the velocity of sales through new channels and increase in advertising. They didn't grow it in the past because they didn't want to make that investment but we have access to capital to make that investment.
Berkshire hathaway used to do a lot of this. Also, if the sellers want to retain upside, they can accept some portion of the purchase in stock from Moonshot