191–200 of 207 posts
I will never invest in a startup where the founder(s) don't believe in their companies. Moving forward all terms I negotiate will explicitly state that this (e.g. things like FounderPool) will not be a possible scenario.
Earlier quoted context omitted.
It’s been done before: http://ebexchange.com/
This is secondary market liquidity, yes? If so, there's unfortunately no demand till series C, and the board needs to allow secondary sales, which competes with the company's own ability to raise capital. We're seeing VCs at later rounds include cash payouts to founders to dissuade secondary market activity. Also it's not either/or. Participating in a pool does not block the founder from liquidating shares on the ope…
It’s a reasonable idea, but would make a lot more sense for employees. While outside forces impact companies, founders and executives are responsible for outcomes. Employees have little individual power to impact strategy and are more likely the victims of poor management decisions.
Founders and executives "play a role" in outcomes. The future of any company pre liquidation is uncertain. Agree with employee pools. That is the next step version for founderpool and it is literally the most requested!
Even at massive scale, similar business diverge in profitability due to strategy decisions during all market conditions, including pandemics and other blackswan events
As you get older without an exit, you start to freak out a bit about your retirement. At least that was true for me. I'm 1000x better as an entrepreneur at age 42 than I was at age 27. But I'm also 100x more worried about some basic financial things like whether I will be able to retire, maintaining a mortgage, keep up financially with my spouse's career and her changing life expectations. And what helped stabilize m…
> A 0.1% equity stake in a startup that ends up hitting is life changing. For the vast majority of startups, "hitting" is $100-200M acquihire. 0.1% of that is only 200K. If you can get in on something like Beyond Meat, sure, but that's the kind of a company which won't be a part of something like this. Speaking from the other end of this spectrum, BTW, my risk tolerance is higher now than it's ever been. I don't have…
Have you actually modeled out the potential payouts? How did you choose the 1% number (percent of their equity that each founder contributes) as well as the pool size of My quick back-of-the-envelope calculation: Expected payout to each member would be: 1% * avg_valuation_of_companies_in_pool * avg_percent_ownership_at_exit Assuming an average valuation (in the literal sense, total exit value of all co's in the pool…
Why would ownership at exit matter? If the founder only has 15% ownership then he will still have to give up 1% not 0.15% of total equity. This means the founder will be left with 14% equity.
> You contribute 1% of your equity into your pool.
My understanding is that if a founder owns 30% (say) of the company when they join the pool, they would contribute towards the pool a number of shares corresponding to 1% of that 30%, i.e. 0.3% of the company. Which will presumably get further diluted by the time the company exits.
Having founders contribute X% of their equity at the time they join the pool is more reasonable from a practical execution standpoint than having founders contribute X% of the company the time of exit.
Have you actually modeled out the potential payouts? How did you choose the 1% number (percent of their equity that each founder contributes) as well as the pool size of My quick back-of-the-envelope calculation: Expected payout to each member would be: 1% * avg_valuation_of_companies_in_pool * avg_percent_ownership_at_exit Assuming an average valuation (in the literal sense, total exit value of all co's in the pool…
1) Pools sizes are not fixed number and more over, founders can invite other companies to existing pool on a rolling basis 2) We have done modeling, obviously selection is the top determinant of payouts (20% avg. success rate vs 40% success rate) but bigger pool sizes ensure potential for a breakout company. Happy to share if interested, contact us at contact at founderpools.com
Yes, but the payout gets distributed among a larger number of companies. Increasing the pool size lowers the variance, but the expected value remains the same. Lower variance might be desirable for some people (more predictability -- at the limit it's as if you're investing 1% of your equity into an "ETF" of early-stage startups), whereas some people might prefer higher variance (higher potential upside if they join a pool with the next Stripe).
My concern is that if founders contribute 1% of their equity (not 1% of the entire company at exit), the expected value itself is quite small -- on the order of $150K under reasonably optimistic assumptions -- for something like FounderPool to make sense.
On the flipside, increasing the 1% by an order of magnitude might make more sense from a utility maximization point of view, but even less sense from an emotional standpoint.
Earlier quoted context omitted.
> A 0.1% equity stake in a startup that ends up hitting is life changing. For the vast majority of startups, "hitting" is $100-200M acquihire. 0.1% of that is only 200K. If you can get in on something like Beyond Meat, sure, but that's the kind of a company which won't be a part of something like this. Speaking from the other end of this spectrum, BTW, my risk tolerance is higher now than it's ever been. I don't have…
> "hitting" is $100-200M acquihire. 0.1% of that is only 200K. Note that there are liquidation preferences so it's usually not as simple as that. If 100M had been invested at 1x liquidation preference, investors hold 33% and the startup is sold for 150M, then they'd only get 50M from their shares so they'll likely execute their right to get their investment back (at the expense of their shares, let's assume the deal…
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LoL this is me, without the hit. Two decades in and no liquidity. But soooo much scar tissue.
Welcome to the reality of survivorship bias... At least we are talking REAL life decisions, the interesting part is that its probably the majority of people, still no liquidity after years of work. On a bright side, its going to be fine but next time we will all think twice regarding the trade-offs.
It's a very nice idea, and I hope you implement in a great manner! Only thing I disaprove is "Being a founder just got riskier" on landing page lol