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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)

#261

Post by sb8244 »

ytx wrote: post #258
sb8244 wrote: post #199

Earlier quoted context omitted.

I think it's worth it still. Depending a lot on the company: * Ask questions to founders if they raise on participating preferred (the worst). Don't take a job if they do or if they won't answer * Find a place with early exercise of options * Find a place with a healthy company culture. (I believe this correlates) I made a lot off of options, while having a good salary. I know others that did the same.

But is there any recourse to the founders telling you one thing and then raising differently later because "circumstances have changed?"

Of course not, but there's a big difference between persistent bad raises and a single one.

Bad terms are raised due to bad founders (not knowing better) but more likely bad company health. (That can include trying to raise 50M series A as we saw in past 2 years.)

A healthy company with good founders (or lawyers) should be able to avoid issues.

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

#262

Post by wly_cdgr »

dvko wrote: post #79
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.

I’m a bootstrapped founder but hard disagree with this take. Surely it can’t be the founder taking home a healthy salary from day 1 despite the company being far away from any revenue at all that is taking the risk in your book?

It absolutely is. The typical SV investor is risking essentially nothing - a portion of their wealth that does not make a meaningful difference for their standard of living. And they are free to do whatever they like while they wait for their investment to play out. The founder, on the other hand, is risking years of their one life (and probably their one YOUTH) - years that could have been spent in a myriad other ways.

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

#263

Post by dasil003 »

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.

This is a naive and simplistic view that immediately breaks down in the face of individual freedom. Founders are not forced to take investment, nor are investors force to make it. Terms must be negotiated.

You can say liquidation preference should be forbidden, but that's a slippery slope. Many founders accept a liquidation for larger valuation, and many deals would not happen without it. I'm not sure why we would draw the moral line here since the risk of founding and joining startups exists either way.

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

#264

Post by mattmaroon »

Was curious why no mention was made of their funding rounds' sizes and valuations so I hit the Google. Couldn't find the exact rounds, but they raised over $416m and sold for $465m. That's a fail, and you wouldn't expect the founders to get much in any case.

If you raised $415k to start a restaurant, ran it for a few years at a loss, then sold it for $465k, you wouldn't expect to pocket anything. Adding a few zeroes and calling it a tech company wouldn't change that.

I don't think the story really necessitates liquidation preferences.

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

#265

Post by adastra22 »

pc86 wrote: post #223
dr_dshiv wrote: post #134

Earlier quoted context omitted.

> 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 this is 100% the point of Venture Capital, and 100% what "startup" actually means . Startup means a moonshot, something that has a 99.9% chance of failure but if it succeeds will have a gigantic impact. Someone working on their $500 MRR form-builder app isn't building a startup, they're "just" building a regular ole business. Personally I'd much rather build a business than a startup.

That’s definitely how VCs work, but startup has a broader meaning than that. Any young business that is still figuring itself out is a startup, even bootstrapped “lifestyle” businesses.

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

#266

Post by nwsm »

mattgreenrocks wrote: post #238

Suppose I were evaluating a startup as a potential employee. What would I ask to get more insight into how funding is structured? I realize the terms can change in future rounds, but I'd like to at least get a sense of where things are now.

If you are interviewing for an early employee position maybe you can ask them directly, but otherwise I doubt you'll have much luck. Sites like crunchbase [0] offer some information, much of it paywalled, but I'm not sure how detailed they can possibly get on liquidation preference / drag along rights.

[0] https://www.crunchbase.com/organization/fanduel/company_fina...

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

#267

Post by whiterknight »

hn_throwaway_99 wrote: post #247
whiterknight wrote: post #242

Earlier quoted context omitted.

Why is cap table sensitive? When I look at a public company one of the most important things to know is how many shares there are.

The comment you replied to did say to request total shares outstanding. The full cap table will show how much each individual investor owns, and there are valid reasons to want to keep that private.

Could they share one with all information except names?

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

#268

Post by adastra22 »

mousetree wrote: post #185
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"?

It means they’ve missed payroll. I have no idea why this poster is still working there or even considering this offer.

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

#269

Post by offices »

throwaway2203 wrote: post #235
mooreds wrote: post #192

Earlier quoted context omitted.

Wow, quite a quandry. What did you do?

Super curious as well

It's not that exciting - I was already halfway out the door for unrelated reasons. It's a problem that almost any company in that space shares. It's made me put a strong premium on working for companies that sell a real product for real money, today.

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

#270

Post by pclmulqdq »

lagt_t wrote: post #61
pclmulqdq wrote: post #11

Earlier quoted context omitted.

Having bootstrapped and also founded VC-backed companies, the VCs are effectively making you an employee. But you get to gamble some of your paycheck, so it's a bargain a lot of people are interested in. A lot of my friends who are in the VC space see "X person sold company Y for $500 million" and sort of assume that X made at least $100 million from that transaction, when they very often didn't. The bootstrapping/sm…

After all these years of VC funding, I can't believe there is still "street cred" attached to it. Not contradicting you, I'm just flabbergasted people haven't caught on their track record.

I don't know why, but I think a lot of providers treat it as a crackpot filter.

These days, I see more crackpots getting VC funding than not, though.

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