Venture capitalists have the concept of a zombie. Just like in the movies, a zombie company is one of the living dead. It is a company that is not burning through cash, and so is not going to go bankrupt if starved of further investment. On the other hand, it is not doing well enough that it has any exit possibilities. Venture capitalists have a fuse burning on their funds though, and generally 7 to 10 years after they first raised money for the fund they want to be able to close it down and do the final accounting: so many companies were sold for nice gain, so many ran out of money and so on.
But zombies make this difficult since they are not dead yet and could even go on for years growing slowly, successfully funding operations out of revenue but never achieving a growth rate that is going to interest another company in a merger or acquisition, never throwing off enough profit to make a merger with anyone accretive.
In this scenario, VCs will push companies to try something, anything, that might create success, even with the attendant risk of total failure. VCs like the answer to be clear even though the employees would rather simply have a job for a long time. Simply winding up the company is unattractive since, say, $1M for a technology sale is so close to zero as to be the same thing, so if there is any risky chance of quickly making the company genuinely successful that is more attractive.
Public companies can get into this state too, not doing well enough to go anywhere but not doing badly enough to die. Their stock price languishes since there is no chance that anyone is going to try and acquire the company as for its running business, and little chance that the company is going to break out and become a star performer.
For example, at one point soon after I left VLSI Technology their market cap (their share price times the number of shares outstanding) was not only less than their book value (the value of all their capital equipment, buildings, investments and cash) but less than the cash they had in the bank. In theory it should be possible to buy the company using its own cash (ignoring any premium).
This is not just like buying a house with no money down, it is like buying a house for $500K when you know there is $600K in the master-bedroom closet. It is a vote of no-confidence by the shareholders, an acknowledgement that the company is in the value destroying business. Of course VLSI at that cheap price was attractive and Philips Semicondutors (now NXP) bought it for its wireless business with Ericsson and people who knew how to get an process node into production a year or two faster than NXP was able to do with their conservative approach.
A company that is currently in this sort of shape is California Micro Devices (CAMD). Their stock price today is $2.18 with 23.55M shares outstanding. So their market cap is $51.35M. Their last four quarters of revenue totaled just over $60M on which they lost less than $1M. They can go on for a long time like that.
But they have $51.6M of cash and $66.9M of current assets (accounts receivable, inventory, short-term investments) and only $10.3M of debt. So their market cap is equal to their cash, and about half the value of simply winding up the company (probably not all the current assets would be realizable in this scenario though). It is like the house with the money in the closet.
Everyone knows that if they run the business as usual they will simply waste that cash. There is really no reason not to simply wind up the company and return the money to the shareholders, giving them about a 100% premium. But at the same time everyone knows they are not going to do that which is why the stock price does not reflect the break-up value.
Fabless semiconductor companies often have a single hit and make a lot of money on that first chip. Portal Player, who made the sound chip in the first iPods are a good example. But, if they are not acquired, they sometimes go on to burn that money trying to follow up their first hit with a second only to discover like Little Eva (Locomotion) or Norman Greenbaum (Spirit in the sky) that they are a one-hit-wonder.