The Hacker's Guide to Investors
paulgraham.com
The Hacker's Guide to Investors
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Re: The Hacker's Guide to Investors
#2'Most investors are "bottoms" in the sense that the startups they like most are those that are rough with them. When Google stuck Kleiner and Sequoia with a $75 million premoney valuation, their reaction was probably "Ouch! That feels so good."'
I don't think I've read a funnier paragraph about venture investing. Brilliant observation.
Re: The Hacker's Guide to Investors
#3'Most investors are "bottoms" in the sense that the startups they like most are those that are rough with them. When Google stuck Kleiner and Sequoia with a $75 million premoney valuation, their reaction was probably "Ouch! That feels so good."' I don't think I've read a funnier paragraph about venture investing. Brilliant observation.
The fact that PG has been a founder and an investor just helps things.
Re: The Hacker's Guide to Investors
#4"Since valuations are made up, founders shouldn't care too much about them. That's not the part to focus on. In fact, a high valuation can be a bad thing. If you take funding at a premoney valuation of $10 million, you won't be selling the company for 20. You'll have to sell for over 50 for the VCs to get even a 5x return, which is low to them. More likely they'll want you to hold out for 100. But needing to get a high price decreases the chance of getting bought at all; many companies can buy you for $10 million, but only a handful for 100. And since a startup is like a pass/fail course for the founders, what you want to optimize is your chance of a good outcome, not the percentage of the company you keep." [Excerpt taken from the Essay]
This is exactly the reason Technorati is finding it hard to sell, whereas MyBlogLog got sold within no time and Newroo even before they could launch the product.
Re: The Hacker's Guide to Investors
#5It's telling that the "comment" link for this essay goes here and no longer to Reddit.
Re: The Hacker's Guide to Investors
#6It's telling that the "comment" link for this essay goes here and no longer to Reddit.
That might be bad; it means that this community will grow in the same way as Reddit did. Which was fine for a while, and maybe it'll be fine here because the powers that be here are less religious about not messing with the content.
Re: The Hacker's Guide to Investors
#7It's telling that the "comment" link for this essay goes here and no longer to Reddit.
Since a social network's value increases at something approaching the square of the growth rate in users [1], it makes sense for wealthy backers to be active participants early on -- which is probably why Peter Thiel has a LinkedIn profile and Tom updates his Myspace.
[1] And a user's incentive to join correlates with the average desirability of other users, in terms of whatever the network focuses on. Link-finding ability for reddit, popularity for Facebook/Myspace, sexual attractiveness for dating sites, disposable income for business networking sites, etc.
Re: The Hacker's Guide to Investors
#8It's telling that the "comment" link for this essay goes here and no longer to Reddit.
That might be bad; it means that this community will grow in the same way as Reddit did. Which was fine for a while, and maybe it'll be fine here because the powers that be here are less religious about not messing with the content.
We're determined to keep the site focused, however many users we get. We kill submissions that are egregiously off-topic.
Re: The Hacker's Guide to Investors
#9Earlier quoted context omitted.
That might be bad; it means that this community will grow in the same way as Reddit did. Which was fine for a while, and maybe it'll be fine here because the powers that be here are less religious about not messing with the content.
We're determined to keep the site focused, however many users we get. We kill submissions that are egregiously off-topic.
Killed stories should be a big karma hit excepting maybe dupes.
Re: The Hacker's Guide to Investors
#10_That means they're less likely to stick you with a business guy as CEO, like VCs used to do in the 90s. If you seem smart and want to do it, they'll let you run the company_
"Let you run the company" ? Surely a single round of funding doesn't take majority ownership from the founders?