Every time you raise money you negotiate the terms for that private placement. Lets say your start up has 3 rounds, A, B, and C, and raises $1M, $2M, and $10M with a 1x liquidation preference. Now you're business is sagging and you're about to close up shop, but an investor comes in and says "We'll provide the money but we want 3x senior liquidation" which is to say they get paid back 3X their money before anyone els…
I know a finance prof who is going to get this in his inbox. Seriously good explanation, great work!!
Wow, the arrogance of expecting 'hush money' and complaining if you don't get it? Liquidations preferences are pretty much the norm in Silicon Valley, if they didn't understand how they worked when they chose to get outside investment, then they never should have agreed to the liquidation preferences to begin with (which may easily mean they never should have gotten outside investment to begin with).
And the firesale tweet: To be fair, it was a total firesale. In the years since we all got politely pushed out, the business had completely tanked. https://twitter.com/monstro/status/585797874300035072 Also: Usually they at least throw the founders some hush money, but we didn't even get that! So I promise you'll hear more about it soon. https://twitter.com/monstro/status/585798828822892545
Maybe my memory is incorrect, but they were kind of sketchy; their page implied companies not paying them weren't interested in customer interaction and they wanted $1200/year to get rid of competitors' ads before 37 signals called them out: https://signalvnoise.com/posts/1650-get-satisfaction-or-else
I seem to remember at the time there was about 1/2 year - year where Google loved them and you'd get a Get Satisfaction result for googling "[company name] support". GS were HN darlings for a little bit, then started getting annoying because you'd land on this pointless page, then 37signals (rightfully) publicly called them out, then google seemed to delist them in a panda or something and then everyone forgot about them.
According to their website they have 1000s of customers paying 1200+/m. At the low end they're getting 1.2 million in revenue a month and only have 9 employees. Why did they sell? Something is not adding up.
According to their website they have 1000s of customers paying 1200+/m. At the low end they're getting 1.2 million in revenue a month and only have 9 employees. Why did they sell? Something is not adding up.
Wow, the arrogance of expecting 'hush money' and complaining if you don't get it? Liquidations preferences are pretty much the norm in Silicon Valley, if they didn't understand how they worked when they chose to get outside investment, then they never should have agreed to the liquidation preferences to begin with (which may easily mean they never should have gotten outside investment to begin with). They made a gamb…
This feels like karmic justice for founders whose own business practices were debatable.
The company tanked after having elected to raise $20M over 5 rounds, for what should have been a very profitable lifestyle business. The lesson is not to raise VC money for a business where it does not make sense.
He also has a relevant tweet deeper in the thread
> Taking VC is like getting the world’s worst boss: Shitload of opinions, undue level of influence, never actually shows up for work.
Here's their funding history: https://www.crunchbase.com/organization/satisfaction/funding... And here's a handy explanation of "participating preferred" which is one way early sharholders can end up with nothing: http://www.feld.com/archives/2004/08/to-participate-or-not-p...
There is no need to assume PP, since it is still relatively rare. They just had to sell it for less than the sum of preference.
As a technical founder, I'd be very careful to start a company again. I used to ignore finance and bureaucracy, but the industry has changed a lot. The popular quote 'just passionately build something' is nothing but a trap. Although something like YC doesn't fit this profile, one will eventually find himself in a hostile situation.
I think as more and more tech co-founders go through the meat grinder and deal with the realities of the business side of VC backed startups, we'll start to see technologists start very interesting companies with very different ideologies and goals then people seem to have today. Diversity in how we approach business is a great thing.
The company tanked after having elected to raise $20M over 5 rounds, for what should have been a very profitable lifestyle business. The lesson is not to raise VC money for a business where it does not make sense.
He also has a relevant tweet deeper in the thread > Taking VC is like getting the world’s worst boss: Shitload of opinions, undue level of influence, never actually shows up for work. https://twitter.com/monstro/status/587413328055635968
Looks like he is really bitter from this whole deal. Meanwhile there are 100s of start-ups taking on VCs with Ycombinator.