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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)

#151

Post by MichaelZuo »

pfooti wrote: post #44
Analemma_ wrote: post #21

Earlier quoted context omitted.

It's not just your friend: a lot of people have given up on options. Obviously they're underrepresented here on HN because this is a startup-focused forum, but I know many, many people who have concluded "options have an EV of zero, startups pay options in lieu of market-rate salary, therefore startups are a raw deal; I will only go to FAANGs". They're sort of a dark matter universe since they are only visible in the…

This is me. I work at a FAANG, about half of my very good compensation is in RSUs. All the startup companies I've talked to (I don't turn down recruiters out of hand) seem to like my skill set, but cannot really meet my comp requirements without valuing options as if they were 100% guaranteed to convert at the current high valuation. It's a bummer - startups do a lot of really cool stuff, but I'm at a point in my car…

No one's even made you an offer at say a 50% chance? That's a bit strange.

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

#152

Post by MichaelZuo »

pcl wrote: post #110
lumost wrote: post #34

Earlier quoted context omitted.

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 committe…

It's much like a miniature version of the World Bank or other MDBs.

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

#154

Post by agentgumshoe »

fakedang wrote: post #142
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, 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 ma…

Which... Is the same maxim still

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

#155

Post by agentgumshoe »

LudwigNagasena wrote: post #132
whiplash451 wrote: post #108

Earlier quoted context omitted.

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]…

So they raised $416M and sold for $465M. That's 12% ROI. The investors could just buy normal stocks and get similar returns in a year. I don't think there is anything remarkable about this case. It's not like they got a $100K grant and received nothing from a $500M sale.

ROI depends on whether the company is profitable going forward too I'd imagine...

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

#156

Post by sokoloff »

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…

If you have a reasonably documented trail that you’re owed back pay, I’d take a “f#%k you; pay me” [in money, not paper] approach.

No way would I put $200K into a startup that’s facing a down round, especially not as an employee.

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

#157

Post by swiftcoder »

RowanH wrote: post #115
bionsystem wrote: post #73

Earlier quoted context omitted.

It's still better to have 10% of a billion rather than 100% of a million. It's just that "valuation" is only one of the metrics that really matters, and selling your equity has to be done progressively and by reading the small prints in every file. It's sad that startup founders have become so good at raising money that they forget that a path to profitability + understanding the actual financials (beyond just valuat…

It's just what are the odds of 10% of a billion vs 100% of a million. Without any statistics at all to back this comment, I bet there are a magnitures more software companies out there that have made people 100% of a million, vs 10% of a billon. You're talking such a small pool (which might seem large in HN terms) when in reality there's an incredible number of small software companies globally. Of course not discour…

You can also earn 100% of a million in a few years by punching the clock in a 9-5 in the big tech side of the industry. Even at that level of expected returns, startups are extremely risky investments...

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

#158

Post by offices »

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…

>It also forces you to keep pivoting and finding a cash cow rather than assuming your initial plan was any good.

Formative experience: working at a startup, coming upon a fundamental technical problem that will prevent delivery of any of our revenue generating projects & realising that anyone who has spent a meaningful amount of time working on the software would notice the same problem. Noticing nobody else has brought it up.

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

#159

Post by fakedang »

agentgumshoe wrote: post #154
fakedang wrote: post #142

Earlier quoted context omitted.

> 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 ma…

Which... Is the same maxim still

Nope. A lot of people and businesses "want" something. But they're barely ready to pay a reasonable market rate it. Whether it be a $2 pm SaaS or a $100m blockbuster drug compound.

They would still want it though, if they got the drug compound at a heavy discount, or the SaaS for free. And they'll keep telling you they want something that does exactly what those products do.

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

#160

Post by navane »

noduerme wrote: post #149
gnicholas wrote: post #114

Earlier quoted context omitted.

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...

He bought gambling stock with his retirement fund, struck gold, and now has 5bn untaxed in a US account?
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