251–260 of 943 posts
Earlier quoted context omitted.
A lot of people (esp people that performed extremely well in school and in corporate environment) find "failing" and "losing reputation" very stressful.
I guess harden the fuck up?
This post has managed to piss off everyone: employees who didn't realize founders were getting liquidity events while they're still sitting on their more-often-than-not valueless equity, and founders who feel they've earned it and don't like the implication they haven't.
It wasn't Adam Neumann sized liquidity but certainly mid single digit millions at least. His company meanwhile has floundered with wave after wave of layoffs post ZIRP era.
The question I am most interested in is: How do people even get funding (or in other words: Who gets funding) I'd assume it's 'references', i.e. which school you went to, which university you went you, who you know/who knows you Where are early employees from? Are they still from the same elite circles?
Second question first, early employees are from anywhere, just make sure they are hungry to ship. You want devs able to self-organize and self-manage amid ambiguity and pivots, and filled with an urgency to get working software in the hands of users to get feedback to iterate, and you want sales/product able to listen and drive focus on product that users believe could be 10x better than however they meet their need today.
Answering your first question, this answer sounds cynical, but this is how the math usually has to work for VC to give outsized returns to pools of investors in VC funds:
You need to have a 20% to 5% chance at 2x - 10x annualized growth generating high cash flow and high margins reinvestable in the business with ability to switch modes and cash out or IPO in 5 years to let investors exit by year 7.
In other words, don't aim for a solid dependable low risk business plan. Aim for a unicorn business plan. To get funding, your business plan should be so compelling that in a funding round of 10 startups, yours is the one delivering returns that make up for the other 9 blowing up, and still giving the investors in the venture fund returns that are a multiple of the stock market.
Remember VC have customers too, their investors. Their investors want a basket of startups that handily beat just parking their money in a market-beating ETF of Apple, Meta, Tesla, Nvidia, Netflix, Alphabet, Microsoft ...
In practical terms, your business plan must convincingly show that the startup can grow exponentially (not just "up and to the right" but a curve) and overcome inherent risks (show you're risk aware, and already planning to beat the risks). Investors are looking for ideas that can stand out in a portfolio where the rare successes can de-risk returns that far outweigh the more common failures, for their portfolio to generate overall profitable returns.
To get funding, position your startup as a standout gem for a portfolio.
Many companies don’t get to Series A and very few companies get to Series B. Even if they do get to Series A or B, they won’t be able to raise the amounts you see in the news and have heavy dilution. Very few founders have double digits percent ownership by Series B and Series C. Liquidity of $400k or more is a lot and isn’t available for many founders. All of this after 7 to 10 years of working 80+ hours week, no so…
He is saying that it is sketchy that this is hidden from employees.
Earlier quoted context omitted.
If you have 200 million "of your own money" to spare, you are no longer just a person for the purposes of this conversation, you're a walking VC fund, and you're not really risking a substantial change to your quality of life going from 250M to 50M net worth. Your living expenses are already generously compensated for by the large salary that you, the VC fund pays you, the person, out of your personal bank account, a…
You may dislike Elon, but it's pretty absurd to say that what he did is trivial.
Earlier quoted context omitted.
I have seen a lot of companies, a lot of rounds. I have known zero founders who have turned down an option to take money off the table (and zero A raises that offered that to employees). I love the idea of your universe, though.
It happens. I was offered the option to liquidate up to 20% of my vested shares at my last company's Series A. It was restricted by tenure though (3 years), so it wasn't available to everyone. In retrospect, I should have liquidated the full amount, but it was a new concept to me at the time and I was more conservative with the amount. I more recently interviewed with a pre-series A company and they said that they'd…
Oh wow, how many companies have a series A after 3 years? How did your company survive without any raises for 3 years and what made your company finally decide to raise money after going 3 year without doing so?
The best startups have a concept which is summed up thusly: “We all go to the pay window at the same time.” It’s ok for founders to take a little bit of money off of the table if they extend that to their employees as well. Asymmetry is where things get weird. I’ve seen many founders who got deep into the fundraising cycles without ever realizing they could take a cent out. VCs will constantly tell you to let it all…
I have seen a lot of companies, a lot of rounds. I have known zero founders who have turned down an option to take money off the table (and zero A raises that offered that to employees). I love the idea of your universe, though.
Secondary at Series A is very rare. Part of the reason more early employees don't get included in secondary sales is because of the Securities Exchange Act of 1934 14e-2. If you have more than 10 sellers involved, the transaction can be considered a tender offer, which triggers additional regulatory requirements and disclosures. > As of 4 months ago I left a very successful stealth startup (which grew to 40M in ARR i…
Where would the stress come from? You get a paycheck and there is no personal downside except opportunity cost (and perhaps reputation). You don’t lose any money if your startup fails.