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Judging by the tweets mentioned and linked in this thread, there are going to be some interesting articles come out of this. I for one would love to see the intricacies of investor influence. This sounds like it was a total fluster cluck.
> fluster cluck Does the extra "l" bother anyone else?
With that kind of money raised, the founders didn't get "nothing". They got a salary, probably a decent one, for however long they were running the thing. Which is more than many startup founders get out of businesses that fail. If they don't have personal debt, or didn't lose relationships or friendships, they came out ahead of many startup founders who started a business that failed.
They raised more money than the business was worth. I don't blame them for doing so; many people have done it, and no amount of seeing other people make that mistake will necessarily prepare a founder to turn down several million dollars of extra runway to try for the big exit. But, it sounds like there is simply less money on the table than there are people wanting that money (and that have contractual rights to it).
Given the interests of GetSatisfaction were always misaligned with the interests of their customers (i.e. the business model was effectively a shakedown, in the same vein as Yelp), it shouldn't be surprising that eventually their dreams didn't align with the reality of how many people wanted to pay for it. No matter how good the product is, if you have to extort people to buy it, you're not building a sustainable business.
I'm all for ranting about VCs being assholes, because sometimes they are. But, as far as I can tell, that's not the case here. Founders made some bad calls, probably some other people did, too. The business failed. It happens. If I were them, I'd take this as a valuable lesson...and probably wouldn't burn bridges with the people who invested in me in the past, because history indicates they'll be the same people to invest in me in the future (a failed business is not a death sentence in the valley, and many investors have invested in the same team for multiple businesses).
Earlier quoted context omitted.
Interesting. I didn't know that. I understand that if expectations are not met there have to be consequences. But leaving the founders of a company with nothing while others earning money feels completely wrong.
I forgot about the debt holders. So if there was any debt (including un-converted convertible notes), the pecking order is: 1) Debt holders 2) Most senior shareholders and their liquidation preference 3) Less senior shareholders and their liquidation preference ... 99) Common stock holders This is actually to align the founder incentives in shooting for a big exit. Insert any other order of preferences, and the found…
Investor puts in $1m for 20%.
Founders quick flip for $30m. The investor just made six times his money, and earned a payout fully aligned with the founders. Absolutely nobody got screwed.
The reason investors like liquidation preferences, is so they can improve their odds of getting their money back at least (and yielding the first dollars of return). They aren't aligning their interests with the founders in this case, they're putting their interests in front of the founders, just as debt does. Liquidation preferences are a way of saying: my equity is more important than your equity; you need my money, so I'm going to make sure my money is treated with more importance than your equity.
Liquidation preferences exist solely to protect investors from their own poor choices at the expense of the founders / earlier shareholders.
I have very limited knowledge of this situation, but, I'm gonna pile on anyway: With that kind of money raised, the founders didn't get "nothing". They got a salary, probably a decent one, for however long they were running the thing. Which is more than many startup founders get out of businesses that fail. If they don't have personal debt, or didn't lose relationships or friendships, they came out ahead of many star…
http://www.nytimes.com/2005/01/26/technology/26iht-dotcom.ht...
http://venturebeat.com/2005/12/09/epinions-settlement-a-blac...
Though I'm not sure it's the case here, I'm of the epinion that occasionally, you need to sue to getsatisfaction.
When startups don't sell for above their valuations, the investors are going to get their money back first (and in varying cases more, depending on liquidation preferences).
Pulled GetSatisfaction's tables from PitchBook, take a look at their B round: http://i.imgur.com/zUzDrFp.png
Post valuation at over $50M - no data yet on the amount of the acquisition, but if it was equal to that or less (or if the liquidation preferences for the A/B rounds were greater than 1X) it's pretty clear the founders wouldn't have gotten anything from the acquisition. But as someone else pointed out, it IS likely they got a salary from those early rounds of investors, which, is better than most startup founders see.
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.
$1200/year, not per month, and according to this tweek the business had "tanked" in recent years: https://twitter.com/monstro/status/585797874300035072 . Edit: Actually $1200/month according to the pricing page, nevermind. That's insane, and way above competitors like ZenDesk.
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.
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.
$1200/year, not per month, and according to this tweek the business had "tanked" in recent years: https://twitter.com/monstro/status/585797874300035072 . Edit: Actually $1200/month according to the pricing page, nevermind. That's insane, and way above competitors like ZenDesk.
How many customers at $1200/mo per shot do you need to feed 9 employees?
