Venture Capital and Its Discontents • Hacker News Board

Re: Venture Capital and Its Discontents

#11

Post by mrkurt » Tue, May 31, 2016, 5:45 PM UTC

projectramo wrote: post #7

hugs wrote: post #6

Earlier quoted context omitted.

But there is a difference in deal structure. If you want to, you can pay back the investment via profit sharing, which is unheard of in traditional seed/early stage VC deals. (Disclosure: My current company, Tapster Robotics, is one of the first Indie.vc investments. I would have happily remained self-funded/bootstrapped if it wasn't for Indie's alternative deal structure.)

Wouldn't that be a version of venture debt?

Venture debt is really just a loan you can get from a bank that is "backed" by the reputation of a VC you've already raised money from. Normally the bank gets some warrants as well, but it's just a loan. And it's not accessible to companies with the $10k/mo in revenue that indie.vc looks for.

Re: Venture Capital and Its Discontents

#12

Post by soneca » Tue, May 31, 2016, 5:59 PM UTC

projectramo wrote: post #3

*Just type the title into google and click on it to read the article. Anyway, the article talks about how this company didn't take VC money, but took money from Indie.vc (backed by traditional VC money). And then describes the economics which is almost identical to the economics of taking money from a VC firm. The big difference is the apparent lack of pressure, but that pressure is internal. Its not like the VC forc…

Meta:

>Just type the title into google and click on it to read the article.

This is exactly the function of the "web" link below the title.

Re: Venture Capital and Its Discontents

#13

Post by taylorwc » Tue, May 31, 2016, 6:14 PM UTC

projectramo wrote: post #7

hugs wrote: post #6

Earlier quoted context omitted.

But there is a difference in deal structure. If you want to, you can pay back the investment via profit sharing, which is unheard of in traditional seed/early stage VC deals. (Disclosure: My current company, Tapster Robotics, is one of the first Indie.vc investments. I would have happily remained self-funded/bootstrapped if it wasn't for Indie's alternative deal structure.)

Wouldn't that be a version of venture debt?

There are two pretty big differences. The first is that venture debt is usually only available to very established companies, as far as startups go, and have restrictive covenants (regarding cash balance, profitability, other indebtedness, etc). The second is that most venture debt comes with warrant coverage, so the lender ends up taking equity as well.

Re: Venture Capital and Its Discontents

#14

Post by ryporter » Tue, May 31, 2016, 6:18 PM UTC

This is similar to revenue sharing agreements that many investors enter into with startups. Many angels at least bake this option into their Seed Stage investment if they fear that the company could turn into a "lifestyle" business.

Re: Venture Capital and Its Discontents

#15

Post by ryporter » Tue, May 31, 2016, 6:20 PM UTC

“Venture capital can be like a mortgage you can’t afford,” says Atlassian co-founder Scott Farquhar. “It sounds great at the time, but you regret it when your mortgage payments overwhelm you and you realize you didn’t really need a big house in the first place.”

No, venture capital is not at all like a mortgage. There are no payments due, unlike a small business loan, which is very much like a mortgage.

Re: Venture Capital and Its Discontents

#16

Post by calpaterson » Tue, May 31, 2016, 6:22 PM UTC

projectramo wrote: post #3

*Just type the title into google and click on it to read the article. Anyway, the article talks about how this company didn't take VC money, but took money from Indie.vc (backed by traditional VC money). And then describes the economics which is almost identical to the economics of taking money from a VC firm. The big difference is the apparent lack of pressure, but that pressure is internal. Its not like the VC forc…

FYI you can click "web" under the title and it takes you straight to the Google page

Re: Venture Capital and Its Discontents

#17

Post by pc86 » Tue, May 31, 2016, 6:24 PM UTC

cdvonstinkpot wrote: post #2

Blocked by a paywall when I try to read the article. :-(

That what the "web" link is for under the article.

Re: Venture Capital and Its Discontents

#18

Post by bryc3 » Tue, May 31, 2016, 7:00 PM UTC

btown wrote: post #4

Whenever I see an article about a single company that only quotes its leadership and customers, I'm always reminded of http://paulgraham.com/submarine.html ... Not that this pattern is bad per say, but caveat emptor.

Candidly, I thought the piece was going to be a broader look at VC alternatives. I was as surprised as anyone to see that Indie.vc WAS the story.

Re: Venture Capital and Its Discontents

#19

Post by chrisabrams » Tue, May 31, 2016, 7:04 PM UTC

ryporter wrote: post #15

“Venture capital can be like a mortgage you can’t afford,” says Atlassian co-founder Scott Farquhar. “It sounds great at the time, but you regret it when your mortgage payments overwhelm you and you realize you didn’t really need a big house in the first place.” No, venture capital is not at all like a mortgage. There are no payments due, unlike a small business loan, which is very much like a mortgage.

I couldn't have said it better myself.

Re: Venture Capital and Its Discontents

#20

Post by achow » Tue, May 31, 2016, 7:15 PM UTC

ryporter wrote: post #15

“Venture capital can be like a mortgage you can’t afford,” says Atlassian co-founder Scott Farquhar. “It sounds great at the time, but you regret it when your mortgage payments overwhelm you and you realize you didn’t really need a big house in the first place.” No, venture capital is not at all like a mortgage. There are no payments due, unlike a small business loan, which is very much like a mortgage.

I guess Scott Farquhar perhaps meant that 'payments due' are the growth numbers that one has to meet periodically (monthly, quarterly, annually) - to which one had agreed on during the VC funding.