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Sell for half a billion and get nothing (2021)

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181–190 of 334 posts

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

#181

Post by elif »

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…

Never say never. I worked for MailChimp who never touched investor money, never gave out any stock to any employees (not even key engineering staff), each founder retained 50%, and they turned down multiple $1b+ offers until finally accepting $12b from Intuit.

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

#182

Post by coldtea »

DaiPlusPlus wrote: post #109
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.

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

Oh, the humanity! A founder in that situation is going to just get > 500million, not the full billion! How would they be able to afford food?

Also, aren't taxes on things like stocks, equity, etc far lesser than personal income taxes anyway?

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

#183

Post by dgfitz »

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?

Yeah, more or less

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

#184

Post by avereveard »

hamburglar wrote: post #150
avereveard wrote: post #136

Earlier quoted context omitted.

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.

yeah, but one that put you in a weaker position because work based equity is often after a cliff and most likely from the non preference pool and doesn't have clause for buy in during fundraising events

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

#185

Post by mousetree »

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…

What is meant by "cannot meet its capex obligations"?

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

#186

Post by steveBK123 »

This kind of stuff should be a reminder why startup employees skew so young. It's not just youthful energy. It's that they haven't learned the expected value lesson of what their lottery ticket equity really is worth.

You have all the dilution & liquidity issues before you even get into this liquidation preference and drag along rights stuff. 99% of kids out of college going to work on The Next Big Thing do not understand any of this.

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

#187

Post by josephg »

munchler wrote: post #105
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.

Yeah it can also be super illegal here in Australia - falling foul of what are essentially anti slavery laws.

If companies get caught doing things like this, they can be fined for tens of thousands of dollars “per offence” - which is something like the number of missed pay packets across all employees, the whole time this has been going on.

(I’m fuzzy on the details - a friend was an advisor to a startup which paid their employees in crypto. He looked into it - and made them pay everyone in dollars as a condition of having anything to do with the company.)

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

#188

Post by steveBK123 »

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)

It's also important to remember that the risk/return preferences between VC & founders are not aligned.

VC wants to have a portfolio of 100 companies swinging for the fences, knowing most of them are going to zero.

Individual founders do not want to go to zero, and many would be happy hitting singles or doubles.

That is, VC wants their founders to take more risk than is expected value positive for any given founder. A lot of the legal & financial levers VC uses are to force this upon you as a founder.

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

#189

Post by Freeaqingme »

hamburglar wrote: post #59
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…

> "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.

Even when you ask that, make sure to ask for the "_fully diluted_ cap table". It may seem like a small detail, but if you get a cap table that's not fully diluted then what you see may differ a lot from what it ends up looking like once investors exercise their options.

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

#190

Post by mattmaroon »

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 like reading an article about domestic abuse, and deciding that one should just never be in a relationship because that could happen.
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