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As Angel Investors Pull Back, Valuations Take a Hit

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Re: As Angel Investors Pull Back, Valuations Take a Hit

#71

Post by [deleted] »

sireat wrote: post #42
xmj wrote: post #28

Earlier quoted context omitted.

With the difference that $100k is easily reachable in Silicon Valley for engineering positions even before reaching senior levels. Here in Tallinn, not so much.

Was going to say that in Baltics 50k a year is not a salary that an average engineer can aspire to. It is more than the premier makes.. Additional data point: UBNT is paying 36k in Riga which is an outlier at the top. I think most positions with a few years of experience are around 25k in Riga and starting salaries are around 12k.

[deleted]

Re: As Angel Investors Pull Back, Valuations Take a Hit

#72

Post by rdlecler1 »

dsacco wrote: post #2

As an angel investor, I can anecdotally confirm that I've become more cautious recently (in the last year, really). However, I'm not at all concerned about the stock market. That has never influenced my decision to fund a company. My belief is that a strong company can weather a bear market. I'm concerned with the current state of valuations - I enjoy giving investments to companies on the order of five figures or so…

The more money that flows to the sector the more of a magnet it is for sociopaths and I don't think many of us are very good at dealing with sociopaths. You mentioned fraud, care to give some examples (no need to name names of course).

Re: As Angel Investors Pull Back, Valuations Take a Hit

#73

Post by bobfunk »

gmarx wrote: post #27

Whenever I see articles about how easily the investment money flows or had flowed all I can think of, from a purely self-centered point of view, is "what kind of loser am I that I have never been able to raise a single round?" Seriously, my ideas aren't objectively stupider than the ones I see funded. Even in this article, I mean, home eye exams? Did I read that right? How about a startup that will come to your house…

One thing to really internalize is that a business is not a product.

If you just look at some product that's gotten investment and think "why would they invest in that?", you're thinking about it wrong.

The entrepreneur that's been out raising that round has been out pitching a vision for a large billion dollar business, with that product as just one of the initial steps on the road to getting there.

To raise money from investors, you'll need to on the one hand present a vision for a large business like that, a clear road-map to getting there and sufficient proof to convince them that you and your co-founders are capable of executing on that vision and that road map.

Sometimes you prove this with a working product and traction around it, sometimes you can prove it because of a stellar background (having done it before) and sometimes you prove it because you're pitching to people who already know you very well and believe in you.

Re: As Angel Investors Pull Back, Valuations Take a Hit

#74

Post by api »

bsder wrote: post #63
jacquesm wrote: post #51

Earlier quoted context omitted.

> There has been a flood of folks entering the "startup game" who seem to be planning for their IPO before they've even gotten a product off the ground. Again, anecdotally, I'm observing a noticeable increase in fraud among founders who are trying to raise money unscrupulously, especially with novice investors. FWIW I'll back you up on this, definitely a complicating factor for novice investors. Free tip to novice in…

> anything that hasn't been implemented yet doesn't even qualify to be discussed in other terms than hypotheticals. Except that once you implement it, investors start anchoring to how small your numbers are. Catch 22. I work with an actual IoT startup. Hardware--implemented. Backend and frontend--up and running on Azure migration to AWS ongoing. Customers who pay? Yep--and they love it. So, investors? "Ick, haaaardwa…

> Except that once you implement it, investors start anchoring to how small your numbers are. Catch 22.

Are investors really that irrational?

Re: As Angel Investors Pull Back, Valuations Take a Hit

#75

Post by stcredzero »

bsder wrote: post #63
jacquesm wrote: post #51

Earlier quoted context omitted.

> There has been a flood of folks entering the "startup game" who seem to be planning for their IPO before they've even gotten a product off the ground. Again, anecdotally, I'm observing a noticeable increase in fraud among founders who are trying to raise money unscrupulously, especially with novice investors. FWIW I'll back you up on this, definitely a complicating factor for novice investors. Free tip to novice in…

> anything that hasn't been implemented yet doesn't even qualify to be discussed in other terms than hypotheticals. Except that once you implement it, investors start anchoring to how small your numbers are. Catch 22. I work with an actual IoT startup. Hardware--implemented. Backend and frontend--up and running on Azure migration to AWS ongoing. Customers who pay? Yep--and they love it. So, investors? "Ick, haaaardwa…

I'm looking forward to these unicorns winding up on the butcher block and being discovered to have no meat.

http://amzn.com/B00EWZCTD0

Re: As Angel Investors Pull Back, Valuations Take a Hit

#76

Post by api »

rdlecler1 wrote: post #72
dsacco wrote: post #2

As an angel investor, I can anecdotally confirm that I've become more cautious recently (in the last year, really). However, I'm not at all concerned about the stock market. That has never influenced my decision to fund a company. My belief is that a strong company can weather a bear market. I'm concerned with the current state of valuations - I enjoy giving investments to companies on the order of five figures or so…

The more money that flows to the sector the more of a magnet it is for sociopaths and I don't think many of us are very good at dealing with sociopaths. You mentioned fraud, care to give some examples (no need to name names of course).

I've seen some things I'd have to tone down to sell as believable fiction, and this was several years ago doing consulting for startups.

Standard issue asshattery include things like:

- Paper-thin mock up demos of a product being misrepresented as actual finished sale-able product. Sorry but the V in MVP stands for viable.

- Impressive people are touted as employees, even co-founders, and when you go talk to them it's news to them. Maybe they had a conversation with said founder once and expressed some interest and suddenly to investors and others they are the CTO. Sometimes this arises from the founder(s) being so narcissistic that they simply assume that anyone would of course feel privileged to join them. Why wouldn't they?

- Company/founder has sales/vendor relationship with other companies and misrepresents those products as "theirs," implying that they actually own them. In one case I saw rebranding without permission, which is flat out fraud.

- Signups/trials/downloads misrepresented as active continuous users or free users counted together with paid users.

- Lying about educational or work background. A skilled blowhard will do so in an ambiguous way, e.g. "went to MIT" means "attended one workshop there and read a lot of open courseware."

- Products that would violate known laws of physics or proven mathematical theorems. (Or sometimes even grade school math...)

Re: As Angel Investors Pull Back, Valuations Take a Hit

#77

Post by [deleted] »

staunch wrote: post #45
gmarx wrote: post #27

Whenever I see articles about how easily the investment money flows or had flowed all I can think of, from a purely self-centered point of view, is "what kind of loser am I that I have never been able to raise a single round?" Seriously, my ideas aren't objectively stupider than the ones I see funded. Even in this article, I mean, home eye exams? Did I read that right? How about a startup that will come to your house…

It took me a long time to figure this out, because no one tells you, but it's actually very simple. There are two ways people raise money in Silicon Valley: 1. Traction (rapid week-over-week growth, significant press) 2. Reputation (elite background, connections) It's very easy to get some initial traction for these local services businesses, so investors fall for them easily. They lose money on every transaction but…

[deleted]

Re: As Angel Investors Pull Back, Valuations Take a Hit

#78

Post by xmj »

jkaljundi wrote: post #70
sireat wrote: post #42

Earlier quoted context omitted.

Was going to say that in Baltics 50k a year is not a salary that an average engineer can aspire to. It is more than the premier makes.. Additional data point: UBNT is paying 36k in Riga which is an outlier at the top. I think most positions with a few years of experience are around 25k in Riga and starting salaries are around 12k.

$50k gross is <€3k net monthly. There are quite many who make that, probably over 2% of the tech workforce (more than 2-300 people in Estonia). But even with €2k net your consumable income is bigger than for someone making $100k in the Valley.

Technically - $50k gross is, at current exchange rates, around EUR 3800 per month (before tax).

But yes, once you reach EUR 2000 net, you can have a very comfortable lifestyle.

Re: As Angel Investors Pull Back, Valuations Take a Hit

#79

Post by pcmaffey »

This is why I'm conceptually attracted to convertible notes. Valuations always seemed like an illusion...but then caps became status quo as stand-in for valuation. I understand, buyers want to know the price they're paying...

But it's still an illusion. That said, there seems to be a very functional solution: discounts.

I don't understand why they are not used more. Why not develop industry models for expected value increase from seed > A > B, then invest with convertible notes discounted accordingly? Do this for each round... until there is a liquidation event.

The notes themselves would have to offer slightly more protections with each round, but in general, it creates a model of relative value, while that value scale is still being determined... rather than fixating upon some arbitrary valuation.

Re: As Angel Investors Pull Back, Valuations Take a Hit

#80

Post by DiabloD3 »

api wrote: post #74
bsder wrote: post #63

Earlier quoted context omitted.

> anything that hasn't been implemented yet doesn't even qualify to be discussed in other terms than hypotheticals. Except that once you implement it, investors start anchoring to how small your numbers are. Catch 22. I work with an actual IoT startup. Hardware--implemented. Backend and frontend--up and running on Azure migration to AWS ongoing. Customers who pay? Yep--and they love it. So, investors? "Ick, haaaardwa…

> Except that once you implement it, investors start anchoring to how small your numbers are. Catch 22. Are investors really that irrational?

Yes. I may not be apart of that highly rigged game personally, but holy goddamned yes a thousand times. The front page of HN almost always has at least one story during the day about how irrational they are.
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