[marcamillion]

As far as I understand it, that's not the premise that VCs invest in.

Private Equity firms, on the other hand, do this. They buy into companies, so they can share in the cash spoils. That's why they tend to buy companies that have strong cash flows - like GoDaddy, or Utility Companies, etc.

But VCs - especially tech VCs - usually only invest with on the premise that there will be a liquidity event. In fact, it is built into most term sheets - the liquidity terms.

Paying a VC out of the cash generated by a company goes against the notion of a high-tech, high growth company. Companies take outside cash so they can invest in the company and keep growing - because that's how you get the best bang for your buck. It usually doesn't happen the other way around.