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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)

#171

Post by vrc »

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)

I guess that’s why investors bake in protection against singles and doubles.

Basically, give me my market returns if you’re not going to hit a homer so that I don’t need to keep shoveling cash and can spend my time and money on the remaining at bats.

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

#172

Post by rsynnott »

sneak wrote: post #164
cwillu wrote: post #127

Earlier quoted context omitted.

It's a Doctor Who reference to the episode “Blink”, which introduces a villain race of statues that can move, but only when unobserved. Incoherent snippets of dialogue seen on a DVD turns out to be half of a conversation being had with a specific viewer in the future, a transcript of which goes back in time.

Did SCP-173 rip off this premise? https://scp-wiki.wikidot.com/scp-173

I think it's a pretty old idea (things which you can't look at, or which can't look at you, are certainly _very_ old mythological ideas), but... maybe? SCP showed up at about the same time as the first weeping angels Dr Who episodes.

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

#173

Post by giantg2 »

dheera wrote: post #38
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.

Except we're talking about 100% and 200% interest rates, if you read the article. We're talking a $1G company financing $333M and getting nothing.

"Except we're talking about 100% and 200% interest rates, if you read the article."

I did read the article. I even went back a looked again. I see no mention of interest rate for the FanDuel deal.

"company financing $333M"

So if you're saying they financed this amount, there's no way they're subject to 100% interest if the investors get up to approximately $550M. Not to mention this investment timeframe covers years. I don't have the timeframe. What was the actual rate of return? I'm guessing low to mid single digits. Why would an investor put money into something so high risk for so little money when they could just put it in safer assets with higher return?

It sounds like you're angry they got nothing because you're only looking at it from the founder perspective. They agreed to the terms.

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

#174

Post by phkahler »

>> Because they take on significant risks, investors expect to get “VIP” head-of-line privileges to be paid upon a liquidation event such as an acquisition.

What a crock of shit. I understand that employees might be considered "lower risk" because they get a paycheck. But if you're going offer them shares as an incentive then those should be full shares, Same as the others. They are probably led to believe that is the case unless they dig a little deeper themselves. So read that stuff!

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

#175

Post by bjackman »

whiplash451 wrote: post #108
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]…

> FanDuel raised $400M in four years

This changes the complection of the whole article! "Sell for half a billion and get nothing" is _exactly_ what you expect if you raised almost half a billion in finding.

I'm sure all the points in there are important and maybe the author's product is still useful. But it's not really an accurate picture to say that these founders got shafted by unfair terms. They just didn't build a very valuable business relative to the amount of money they spent...

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

#176

Post by jacobgorm »

whiplash451 wrote: post #108
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]…

So the founders probably paid themselves great salaries and perhaps even sold some stock during the funding rounds. Their employees on the other hand likely got thrown under, and given that the funding terms were likely confidential had no way of seeing this coming in any great detail.

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

#177

Post by vitus »

navane wrote: post #160
noduerme wrote: post #149

Earlier quoted context omitted.

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?

He bought 1.7 million founders' shares of Paypal (then Confinity, which he cofounded and was CEO of at the time) for under $2000. These are terms you would never offer to an investor, that you'd never offer to an employee.

For comparison, the SEC filing for Paypal's IPO has Thiel Capital investing a bridge loan of $100k in 1998 which was then converted into 500 thousand shares (100x higher valuation than his individual "purchase" the following month).

https://www.sec.gov/Archives/edgar/data/1103415/000091205702...

From the ProPublica article, re: why this was problematic:

> Thiel’s unusual stock purchase risked running afoul of rules designed to prevent IRAs from becoming illegal tax shelters. Investors aren’t allowed to buy assets for less than their true value through an IRA. The practice is sometimes known as “stuffing” because it gets around the strict limits imposed by Congress on how much money can be put in a Roth.

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

#178

Post by coldtea »

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.…

Dunno, the lesson I've learned is "have your lawyers look at it, and don't fucking give the VCs full priority" would also have worked.

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

#179

Post by coldtea »

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.

>Does anything have a $1B payout for the founder?

Instagram perhaps?

Also, an IPO?

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

#180

Post by coldtea »

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)

>= turnoff for investors

Given the situation described in TFA, that's just as well.

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