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Sell for half a billion and get nothing (2021)

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Re: Sell for half a billion and get nothing (2021)

#101

Post by d--b »

Being the devil's advocate here.

These liquidation things are happening when the company does badly. The founders (and the investors) were probably hoping to do a lot better than what they settled for. Half a billion dollar is great, but not so great if you thought you were going for 10bn...

Without knowing the amount of the investment that the two investors made, the multiplier and the participation, and how the company was actually doing, all argument is moot. Who knows how much the investors put on the table in the first place. They took a risk, tried to have their ass covered should things turn bad, everybody agreed. Then shit happened and these guys managed to sell the thing before losing it all.

Also, the founders probably got paid pretty decently in all their founding rounds, so I don't feel too sorry for them...

Re: Sell for half a billion and get nothing (2021)

#102

Post by cellis »

exogeny wrote: post #69

FanDuel is going to do like $6B in revenue this year. This entire story above happened for three reasons: 1. The CEO made terrible decisions in regards to how much and who they raised from. They got in over their hands as the company grew and the entire founding team got fired. 2. The CEO immediately after, who took over an unprofitable business that wasn't growing and was in bad shape after the merger with DraftKing…

Easy to say they’re sitting on a gusher of cash that was bought with hundreds of millions of ZIRP dollars worth of ads and a time when fantasy everything was nascent. They were in an absolute dogfight with Draftkings and losing iirc. I’m sure things look rosy now but back then there wasn’t really any way to say if they’d win and that’s reflected in the terms they raised at.

Re: Sell for half a billion and get nothing (2021)

#103

Post by gnicholas »

aetherspawn wrote: post #66
jv22222 wrote: post #62

> Lessons Learned: Build a Very Fundable Startup > Every founder should learn from this disastrous scenario the importance of building a very healthy, fundable startup. A healthy, vibrant startup draws more investors during fundraising. The competition gives founders the leverage to negotiate for more founder-friendly terms. Healthy startups get better valuations, better terms, and raise funds with much less effort.…

Yeah I have a small business and I sway strongly towards being contempt with letting the business grow at its own rate. No, it won’t have a 1 bil payout, but you make your own rules and you’ll get a healthy cash out from the dividends after only 1 year or so. It also forces you to keep pivoting and finding a cash cow rather than assuming your initial plan was any good. We’re on like plan #10 now and in hindsight if w…

> No, it won’t have a 1 bil payout

Does anything have a $1B payout for the founder? I guess there are a few companies that achieve this, but it takes only a modicum of humility to realize you're not likely to be one of the most successful founders this decade.

Re: Sell for half a billion and get nothing (2021)

#104

Post by jojobas »

sb8244 wrote: post #35
giantg2 wrote: post #19

If I sell my company for $1T, but I financed $999B of it, should I expect to get a payout? Financing generally requires interest. Seems like the headline is trying to invoke outrage.

What if you raised 500B and still got nothing? That can happen with 2x or 3x liquidation preference. IDK FanDuel structure (not in article), but they only raised ~ 400M. Yet the investors got every dime up to 550+M.

Nobody forces you to sign away these preferences and participation.

It might be a reasonable reflection of your pre-money worth (i.e. near zero) or it might not be.

Re: Sell for half a billion and get nothing (2021)

#105

Post by munchler »

justinlloyd wrote: post #45

I am currently working with a start-up where the company is incapable of meeting its capex obligations. The founder raised a good amount of capital from investors a few years ago, and that provided a decent runway, but there's no traction, no KPIs, and whilst we've built some impressive technology, impressive technology does not bring in revenue. One of the problems (amongst many) is that the primary stakeholder has…

Working without pay is the reddest of red flags in any company. It’s not even a business at that point - it’s a volunteer gig.

Re: Sell for half a billion and get nothing (2021)

#106

Post by JonChesterfield »

justinlloyd wrote: post #94
aledalgrande wrote: post #84

Earlier quoted context omitted.

Leave my dude. You'll be better off

I am just outlining the current situation. Nothing stated in my grandparent comment about my future plans. Had a one hour casual chat with a start-up game studio in early February, and the offer came through in email on Friday for significantly more money and an interesting problem. Had a one hour on-site casual chat with an established robotics company today, that stretched out in to about five hours of casually mee…

Are you evaluating the pay at the current place as if there was no missing back pay? As "slightly more money" sounds like "lots more" when the current place isn't making payroll

Re: Sell for half a billion and get nothing (2021)

#107

Post by ENGNR »

jv22222 wrote: post #62

> Lessons Learned: Build a Very Fundable Startup > Every founder should learn from this disastrous scenario the importance of building a very healthy, fundable startup. A healthy, vibrant startup draws more investors during fundraising. The competition gives founders the leverage to negotiate for more founder-friendly terms. Healthy startups get better valuations, better terms, and raise funds with much less effort.…

So true. There’s only so many things you can master at once. Better to master making a product people will pay for, than playing the VC game for the first time when they’ve already mastered the rules

Re: Sell for half a billion and get nothing (2021)

#108

Post by whiplash451 »

jv22222 wrote: post #62

> Lessons Learned: Build a Very Fundable Startup > Every founder should learn from this disastrous scenario the importance of building a very healthy, fundable startup. A healthy, vibrant startup draws more investors during fundraising. The competition gives founders the leverage to negotiate for more founder-friendly terms. Healthy startups get better valuations, better terms, and raise funds with much less effort.…

That's not super useful advice for founders who (really) need some investment from the get go.

The lesson would rather be: don't raise so much at the seed stage. Google got started with a $100K grant.

FanDuel raised $400M in four years [1]

And it looks like one of the the FanDuel founders did it again [2]

This is reckless and should be a massive red flag for new joiners.

[1] https://en.wikipedia.org/wiki/FanDuel

[2] https://futurescot.com/fanduel-co-founder-secures-largest-uk...

Re: Sell for half a billion and get nothing (2021)

#109

Post by DaiPlusPlus »

gnicholas wrote: post #103
aetherspawn wrote: post #66

Earlier quoted context omitted.

Yeah I have a small business and I sway strongly towards being contempt with letting the business grow at its own rate. No, it won’t have a 1 bil payout, but you make your own rules and you’ll get a healthy cash out from the dividends after only 1 year or so. It also forces you to keep pivoting and finding a cash cow rather than assuming your initial plan was any good. We’re on like plan #10 now and in hindsight if w…

> No, it won’t have a 1 bil payout Does anything have a $1B payout for the founder? I guess there are a few companies that achieve this, but it takes only a modicum of humility to realize you're not likely to be one of the most successful founders this decade.

Even if anyone gets a cool $1b, the IRS is going to come for a good chunk of that...

Re: Sell for half a billion and get nothing (2021)

#110

Post by pcl »

lumost wrote: post #34
AndrewKemendo wrote: post #30

Earlier quoted context omitted.

I stepped out of investing about two years ago because i couldn’t stomach the persistent narcissistic greed dressed up as virtue once I saw it for what it was. The last I saw it was just as bad and frankly getting worse for founders, as investors pulled back when the Fed moved on interest rates. Basically everyone just stopped taking risk except for the giant institutional funds and even then, as of last year were mo…

Out of curiousity - how does a VC fund hold onto "powder"? Do they have terms to invest in a liquid fund, or some other arrangement? Seems like they'd face tough returns if they held powder for long.

Typically, VC funds don't have much cash on hand, and when they make an investment, they issue a capital call to the limited partners (LPs) in the fund. The LPs then are on the hook to send money for the investment, typically within a week or two.

So, a $100M VC fund is really a commitment by the LPs to wire $100M over the course of ~5-8 years.

LPs do all sorts of different things to manage the money they've committed but not yet invested.

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