Meaningful exits for founders (2016)
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Meaningful exits for founders (2016)
1–10 of 91 posts
Re: Meaningful exits for founders (2016)
#2Regardless of where you sit on the line between ambition and optimizing for founder outcomes, I think we can all agree first time founders aren't thinking about the math here enough and are far more susceptible to listening to what VCs say they should do and care about. Having been in this position, all I can say is I'm glad we didn't raise more money because we had far more exit options. I really appreciate what Bryce and indie have done to change the narrative here.
Re: Meaningful exits for founders (2016)
#3The reason there is not a lot of dialogue around this is because the numbers don't work for all parties at the right time.
When you have a small founder team, you need capital for essentially nothing to show. You can't raise that capital selling the $170M exit dream to angels or a fund.
Conversely, VCs are assuming a 10% or less success rate across their portfolio. And of that, maybe 2-3% of portcos really returning everything.
So they don't have the luxury of shepherding 100 portcos to $170M exits, since in reality, a $1b exit has a similar chance of happening as a $170M exit. Which is to say very very low.
There's no magic sauce, no prime formula, no wizened or sageinvestor. It's a shit show from start to finish. You're best off finding investors who are on the same wavelength as you, and focusing less on whether you hit a home run or a grand slam.
When you get to a place where you're printing cash or whatever, then sure, make sure the math works out for you. But for 99% of all founders, this question never comes, and they spend too much time thinking about it.
Re: Meaningful exits for founders (2016)
#4I think for most founders, exiting with 100% ownership of a small pie is a much better proposition than exiting with 10% of a large pie IF you have that decision to make. The risk, hard work and difficulty in the latter are exponentially greater.
Re: Meaningful exits for founders (2016)
#5The reason there is not a lot of dialogue around this is because the numbers don't work for all parties at the right time. When you have a small founder team, you need capital for essentially nothing to show. You can't raise that capital selling the $170M exit dream to angels or a fund. Conversely, VCs are assuming a 10% or less success rate across their portfolio. And of that, maybe 2-3% of portcos really returning…
Sage advice. Most startups fail, so squabbling over the numbers has always seemed absurd to me. I'd rather see discussion along the lines of "what happens after we do well" because you have no idea of what "well" will be down the line.
Re: Meaningful exits for founders (2016)
#6It's crazy that a series d exit would net a founder 7 million and yet my bootstrapped business returned a 4 million profit for me last tax year.
I think people need to learn more about how to scale a bootstrapped business. Even when I was getting started, I read a ton on VC funded businesses but not a lot on non VC funded businesses.
I think there is tremendous amount of money to be made in bootstrapping as well. I think a lot of indie hackers / bootstrappers also think too small.
You can definitely make 100s of millions of dollars without VC money. That part of reality has not been properly dispersed.
Re: Meaningful exits for founders (2016)
#7One thing that would be helpful to add to this post:
1) the chances of your company making it to series B
2) the chances of you as a founder actually making any money.
Much of the startup "legend" of massive exits, everyone making lots of money, is exactly that: legend.
VCs batch startups together because >90% will fail. Of those that do make it out of the incubator in any meaningful way, you can expect another 80% mortality over the next two years.
Say you get aquihired, you're not going to get much of a share payout, if at all.
Even if you get blockbuster hired (ie bought for 250million) you're probably going to get golden handcuffs rather than "fuck you" money upfront.
Same for an IPO, your shares will be converted, but you can't exercise them until after n years.
Re: Meaningful exits for founders (2016)
#8TLDR: dilution is a thing and investor incentives are not always aligned with founder, when it comes to early exit opportunities.
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But...
I don't think there are really a lot of opportunities to exit at $38m in the early stages of a startup, even if your valuation says it is possible on paper. There just isn't much of a market for companies at that stage of growth.
Imo, the more likely scenario is for a startup to either 1. fail to raise and run out of money, or 2. Become self-sustaining, but never successful enough to achieve a meaningful exit for the founders or investors, basically a "zombie" company that may never exit.
In the second case, it is the investors that get screwed, as the founder has made a nice lifestyle business out of their investment. I think most investors realize this is one of the outcomes though, so "screwed" is probably too harsh of a term to use to describe it.
Re: Meaningful exits for founders (2016)
#9This sums up the experience:
Re: Meaningful exits for founders (2016)
#10It's crazy that a series d exit would net a founder 7 million and yet my bootstrapped business returned a 4 million profit for me last tax year. I think people need to learn more about how to scale a bootstrapped business. Even when I was getting started, I read a ton on VC funded businesses but not a lot on non VC funded businesses. I think there is tremendous amount of money to be made in bootstrapping as well. I t…
> Even when I was getting started, I read a ton on VC funded businesses but not a lot on non VC funded businesses.
Any suggested reading for the non VC funded business?