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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)

#141

Post by hnbad »

dr_dshiv wrote: post #134
gnicholas wrote: post #103

Earlier quoted context omitted.

> 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.

> modicum of humility = turnoff for investors. They only care for chances at homeruns — singles and doubles are not welcome. You’d better swing for the fences, because that’s the purpose of VC. (This is my understanding, not my endorsement. Please correct as needed)

No, that seems about right. Traditionally investors prefer investing in a number of moonshots with the hopes that one of them succeeds to such an extreme that it pays for the losses on the rest. There are even some investors known to invest in direct competitors to hedge their bets.

The question only seems to be whether this strategy still works in a higher interest rate environment. As I understand it this development mostly stems from it being more profitable to invest with a low ROI (or a low probability of a high ROI) than to keep the money in the bank.

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

#142

Post by fakedang »

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, but you make your own rules and you’ll get a healthy cash out from the dividends after only 1 year or so.

Actually, it just might. RightNow was a bootstrapped startup back in the dotcom heydays, which managed a 9 digit exit after selling to Oracle. Midjourney is a unicorn without a cent of VC funding. Zapier raised just $2m, and they only got into YC on their second try.

The old maxim of "build something people want" is crap honestly - it's more appropriately worded as "build something people will pay for".

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

#143

Post by gadders »

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.…

Also, avoid that VC/Shareholder and blacklist them.

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

#144

Post by tsylba »

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…

Your writing style is the inspiring level kind.

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

#145

Post by andyish »

They got time, salaries, and a credit line while they developed and tried to grow the product, and I imagine they had a pretty great time with $350m over the years. It's not as though they intentionally undercut them by a dollar, their sale was $94m short.

If the story was what the headline leads you to believe and you 10x'd someone's investment and they did you over, why wouldn't you see red and scuttle your product?

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

#146

Post by realusername »

wly_cdgr wrote: post #52

LOL @ the idea that the investors are the ones who take on the largest risks. Investors barely deserve 1x, never mind anything higher.

Yeah there's a lot of rationalizing going on here, the investors have more generous terms because they have a lot of market power compared to anybody else at the company, nothing more, nothing less. It doesn't necessarily correlate with risks.

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

#147

Post by throwaway290 »

b112 wrote: post #76
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…

I think you're in a same-same path with this. That is, If you say "No, I don't want equity", they still owe your back pay, there are multiple ways to get it, AND if either "back pay" or "equity" is to have value, they must have more funding. Which means, out of that funding can immediately come your back pay. So if you take the equity, or insist on pay, both are the same in the end. In fact, by not showing you what y…

> I've always found, in every single case, if someone doesn't want to show me something? It's because they know they're scamming you. Or selling false goods.

they may also want to hide specifics if things are going great since then the employee may negotiate hard knowing how much they can get more

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

#148

Post by highwaylights »

dr_dshiv wrote: post #134
gnicholas wrote: post #103

Earlier quoted context omitted.

> 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.

> modicum of humility = turnoff for investors. They only care for chances at homeruns — singles and doubles are not welcome. You’d better swing for the fences, because that’s the purpose of VC. (This is my understanding, not my endorsement. Please correct as needed)

That’s the model essentially. Makes a lot of sense too.

Anyone can get S&P 500 returns with little to no risk. That’s not to say they won’t lose money but it’ll be market returns either way, will be very liquid, and readily transparent to the holder.

Given the risk involved in early stage investment the maths just don’t make sense for an investor to shoot for anything short of the moon.

tldr; Seed funding / early stage investing is closer to lottery tickets and Vegas than to your 401k.

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

#149

Post by noduerme »

gnicholas wrote: post #114
DaiPlusPlus wrote: post #109

Earlier quoted context omitted.

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

Yep, although the qualified small business stock exemption comes in handy if/when that happens. You get to exempt a percentage of the gain of the sale of your stock, and if you roll over the gain into other QSBS (by investing in startups, for example), you can defer the non-exempted portion.

Or just be like Peter Thiel and do all your angel investing through your Roth IRA...

https://www.propublica.org/article/lord-of-the-roths-how-tec...

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

#150

Post by hamburglar »

avereveard wrote: post #136
hamburglar wrote: post #59

Earlier quoted context omitted.

> "Can I see the cap table?" - "Can I see the terms of the investors?" These questions should become so normalized that founders don’t bat an eye at it. If I am an early employee, we are partners. Wanting to know my percentage and the company’s liabilities before I sign is not unreasonable. I also want to hear you talk convincingly about your plans for future investment.

If you dont pay to get the equity at market value you're most definitely a worker.

You’re just paying for your equity in a different currency.
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