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Reasons I Won’t Fund You

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Re: Reasons I Won’t Fund You

#31

Post by cocktailpeanuts »

rdlecler1 wrote: post #27

The irony here is that a lot VCs break these rules with either LPs or entrepreneurs: #1 can't see the future (herd behaviour), running VC as a lifestyle business rather than building a platform like a16z, NEA, YC, 500; #5 lack of understanding of the competition (or where they sit in the pecking order); #6 I wouldn't want to work for you (arrogant, or just not that sharp); #7 too slow/too late (slow or non responsive…

The truth to the "irony" is that those are the actual deals that investors want to invest in. This post is for the rest.

If you are the hottest company on the market, none of this post applies to you. But 99.9% of the startups out there are not.

I see a lot of people on this thread saying this guy is arrogant, etc., but I think that's taking it the wrong way. He's just providing his point of view, and it's not just his. Any investor would feel that way and this guy is just verbalizing it so the founders can get a better sense of how to interact with investors.

But like I said, if you're hot, then you're the one who says "22 reasons why I won't raise money from you".

Re: Reasons I Won’t Fund You

#32

Post by cocktailpeanuts »

dbg31415 wrote: post #28

> I don’t want you in the office 100 hours a week. Actually, I don’t even want you in the office 40 hours a week — I want you out with customers But when you’re home. When you’re out to dinner. When you’re relaxing at the beach. Even (sorry) when you’re with your family. I want you obsessing about your company. My last startup we met with an angel investor who was like this. The money isn't worth it, we turned him do…

> And we all did pretty well in the end

He's not looking for "pretty well". He's looking for unicorns, and ask any investor who's looking for a unicorn if they would fund a founder who wants a chill life with work life balance. Good luck.

Re: Reasons I Won’t Fund You

#33

Post by crdb »

dkural wrote: post #2

Looks like he won't fund you if billionaires find your company before he does, and he can't get the cheap equity he'd like. Makes sense for him, but you're also better off not raising from him in that particular scenario. He calls this 'cap table is messed up', whereas he's just late and out-priced by the bigger boys. Your cap table is just fine.

The funding market, like that for employment and marriage, clears at different prices for different individuals.

I'd say the number of founders who can truly aspire to get funded by the "Big Boys" (and have the choice you talk about) is relatively small - for example my lack of connections in the US precludes me from raising from them because I can't get a proper warm intro. You need to align a lot of stars.

That being said, I think he was referring to the complexity of multi-note cap tables (and time and mental effort required to deal with their preferred stock classes etc. vs 5 equivalent other deals using a vanilla structure) rather than the billionaires outbidding him. He talks more about it in another post [1].

Having been on a desk that traded exotics I very much agree that (unnecessary) complication in financial products is not a good thing, and is usually associated with people hoping you'll slip up.

[1] https://www.quora.com/Y-Combinator-What-are-the-pros-and-con...

Re: Reasons I Won’t Fund You

#35

Post by dagw »

dbg31415 wrote: post #28

> I don’t want you in the office 100 hours a week. Actually, I don’t even want you in the office 40 hours a week — I want you out with customers But when you’re home. When you’re out to dinner. When you’re relaxing at the beach. Even (sorry) when you’re with your family. I want you obsessing about your company. My last startup we met with an angel investor who was like this. The money isn't worth it, we turned him do…

we all did pretty well in the end

I agree with you, but he does make it pretty clear that he is not interested in doing "pretty well". He even says that if a $50m exit is your definition of success then he doesn't want to talk to you.

Re: Reasons I Won’t Fund You

#36

Post by devmunchies »

randomdata wrote: post #9
nickpsecurity wrote: post #5

Number 12 surprised me given the number of billionaires that would've failed it. Most are hyperfocused and opinionated early on to the point they don't care who they piss off or destroy to dominate the market they're creating. He'll either get the ones that are consistently good on P.C./P.R. at the beginning or filter out the unicorns he might have gotten. That would be my guess based on what I've seen. How many unic…

> How many unicorns or higher have his venture firm created in practice? I've never heard of any of them. https://angel.co/esignature The one exit was to another company held by the same firm.

Greenhouse is one i've heard of. They're doing well.

Re: Reasons I Won’t Fund You

#37

Post by CurtMonash »

Several of his points boil down to "Tell me how special it would be to have me as an investor, so that I can tell you you need to accept a low valuation from me."

At least, I think they do. He might also just have a great desire to be flattered.

Re: Reasons I Won’t Fund You

#38

Post by mikekchar »

nzjrs wrote: post #34

> I want to hear that you are > building a unicorn And there we have the problem with the scene today.

I agree to a certain respect, but that's VC. You want to bootstrap a company and make a good living? I'm with you 100% of the way, but VC is not going to be a good fit, I think. If you're not giving them 20:1 ROI, they aren't even breaking even (because most things fail). In reality, they want significantly more. Let's say they put in $1 million for even 20%. They need an exit with a valuation of $100 million to get their 20:1. And if they aim for that, they'll go out of business because it's such a risky business. You have to aim for an exit with a valuation of at least a billion. I don't blame him for saying it the way it is.

My personal opinion is that if you are interested in building a solid business rather than striking gold in them thar hills, you are better off with other sources of funding. Hell, if you are doing SaaS, you can probably self fund it...

Re: Reasons I Won’t Fund You

#39

Post by kriro »

I got a really strange vibe from this article. Sounded like the author is in the business of selling VPs/CxO. At least it felt a bit odd that this was explicitly mentioned a couple of times (the bit about not taking a VP intor was really irky). I've heard that the management team is more important for SaaS businesses (as are old school sales people) but I dunno...was a bit odd.

Re: Reasons I Won’t Fund You

#40

Post by ohwello »

logicallee wrote: post #11

Why can't an SAAS startup have 100% gross (not net) profit? Because they're paying $17 per year for their domain?

It's my impression that gross profit includes marginal costs, but not overhead.

I can't speak for the author, but every SaaS company I have been involved with had marginal costs such as customer support. When you are a tiny company and these tasks are performed by founders you could perhaps roll these costs into overhead and claim 100% gross profit. But as a growing company it would become clear that you need to hire someone for every X customers.

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