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I sold Baremetrics

baremetrics.com

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Re: I sold Baremetrics

#281

Post by aaisola »

georgeecollins wrote: post #216
RedditKon wrote: post #175

Earlier quoted context omitted.

I feel the same way, especially in regards to everyone opining on the investors taking a markdown. For context, it was General Catalyst and Bessemer. - General Catalyst: $2.5B+ in Assets Under Management - Bessemer: $4B in Assets Under Management DISCLAIMER: If you take venture capital, you should obviously always do it as a responsible fiduciary of both the company and the capital. With that said, I'm positive both…

I don't want to make any moral judgements against people making business decisions, in particular this founder for making the best deal possible. Good for him. However, no matter how much money General Catalyst or Bessemer made last year, I would not want to invest with them going forward. I get that this is only money on the margins, and they get a benefit from a write off. Still, how hard would they have had to fig…

It has to do with supporting the winners that are actually going to return money to your investors. They are refusing to fall prey to sunk cost fallacy, which is a good thing.

Re: I sold Baremetrics

#282

Post by dasudasu »

Jochim wrote: post #231
coward8675309 wrote: post #186

Earlier quoted context omitted.

The reality is that many startup employees may have stacked Stanford STEM degrees yadda yadda yadda, but they can’t do basic math, don’t have a good intuitive grasp of probability, have outlandish expectations, and/or don’t ask clarifying questions about the cap table. One of my startups sold for about $25-40MM depending on whether you count pre- or post-earnout. The typical engineer got maybe a quarter of a percent…

Agreed on not joining a startup for the money. Although it seems like a lot of damage has been done in setting a cultural expectation that joining a startup early will see you become a multi-millionaire, to the benefit of startups everywhere I suppose. Correct me if I'm wrong here, but isn't another major issue faced by early employees that the math might look good when they join the company, but further rounds dilut…

Savvy investors include non-dilutive clauses when they know money needs to be raised, but good luck trying to negotiate this as an employee. It’s also not too bad if the dilution occurs at increasingly higher share valuations and help compound growth (see TSLA).

Re: I sold Baremetrics

#283

Post by matthewowen »

pier25 wrote: post #143

> But they were incredibly gracious and both agreed to write off their investment. So the investors just accepted to lose $800k while the founder was getting $3.7M? Can someone explain the logic here?

The positive PR/social value of walking away from it is worth vastly more than the money. You're talking a tiny percentage of the fund value – if having a reputation for a willingness to do the "founder friendly" thing helps you get into competitive rounds in the future, it's absolutely worth it.

Re: I sold Baremetrics

#284

Post by intev »

falcolas wrote: post #165
intev wrote: post #115

Earlier quoted context omitted.

There's a sense of entitlement here that's not sitting well with me. Don't get me wrong, I think employees of a "startup" deserve to get some sort of payout during a liquidation event, but I think that payout should be directly proportional to how much risk was assumed. Did they take a full standard salary? (Doesn't have to be SV 100k+ salaries, but standard for whatever is paid in their area). Did they do more than…

There's a vast difference between a butcher in a meat processing facility and a trained professional software developer who is responsible for creating/supporting/etc your software. As for entitlement, what entitles a founder to get ~50x the payout of their employees? Especially when they're also taking a SV level salary (not living in SV) and spending VC money.

I actually very specifically chose the butcher example, and no there isn't. At the end of the day, a butcher, like a software developer can be trained to be good. Initially a butcher would ruin meat and cut into profits by incorrectly making cuts. Over time the butcher can and will get better. Far fewer mistakes towards the end of the career. Same with software engineers. After a point this comparison breaks down, but at least up to here it's comparable. Self taught or not, many educators have proven that good engineering can be taught and practiced. Over time everyone gets better if they care enough. Not everyone can be Donald Knuth, but no one's looking for Donald. Most start up founders just want competent engineers.

Moving on to your second point about entitlement. Of course the founder is entitled to 50x the payout. You seem to be severely discounting risk. Did you see this founder's list of other failures?[1] They can pay themselves whatever they feel is right. They took the risk, failed multiple times, and finally got lucky. Of course they can reward themselves how they see fit. There are so many founders who never see the reward and end up with worse careers because they only kept founding companies rather than choosing a "stable" career. To me it seems like, in your view, the guy who didn't take the risk founding companies and got to join a "sure" job by joining a rapidly growing startup gets to be rewarded comparably to the guy who started something, working, spending years not sure where it was going to go. Why would anyone take the risk of starting a company? I'd rather join a fast growing startup if my reward is quite comparable to the founder's. Low risk, high reward.

[1] https://joshpigford.com/projects

Re: I sold Baremetrics

#286

Post by hedgehog »

georgeecollins wrote: post #216
RedditKon wrote: post #175

Earlier quoted context omitted.

I feel the same way, especially in regards to everyone opining on the investors taking a markdown. For context, it was General Catalyst and Bessemer. - General Catalyst: $2.5B+ in Assets Under Management - Bessemer: $4B in Assets Under Management DISCLAIMER: If you take venture capital, you should obviously always do it as a responsible fiduciary of both the company and the capital. With that said, I'm positive both…

I don't want to make any moral judgements against people making business decisions, in particular this founder for making the best deal possible. Good for him. However, no matter how much money General Catalyst or Bessemer made last year, I would not want to invest with them going forward. I get that this is only money on the margins, and they get a benefit from a write off. Still, how hard would they have had to fig…

Four parts: 1) the bulk of returns are the few best performing investments, 2) there are material fixed costs in carrying an investment (partner attention, conflict management, admin overhead), 3) it's a way to get proprietary insight into a new space, and 4) there's value in founder relationships (deal referrals, recruiting). Large funds write small checks to get an early view into promising companies that are too early for bigger investments. They are aware that many won't out but they believe they are better served getting in early & divesting most vs waiting and having less information or access.

Re: I sold Baremetrics

#287

Post by vidarh »

falcolas wrote: post #87
howlgarnish wrote: post #80

Earlier quoted context omitted.

No, it's an $80k bonus on top of the salaries they got for X years of work, and they're all still employed as well.

We don’t currently know what their salaries are, but it’s pretty common for startup salaries to be 50-60% of normal salaries. The rest is typically LLC stock grants. It’s done this way with the promise of “when we sell” those stock holders will make bank. $80k isn’t ‘bank’. Especially if Baremetrics was following the startup-standard salaries.

Anyone taking a startup job on a 50-60% of a normal salary without several percent of the shares is doing themselves a massive disfavour.

Most of my startup jobs have paid market rate. The shares and options have compensated for the risk, not a lower salary.

I'm sure some accept lower salaries, and certainly the salaries won't be comparable with the very top end of the market, but most people don't work in the top end of the market.

A startup that tried talking me into a massive cut without offering me basically founder-level share amounts would be an instant red flag.

Re: I sold Baremetrics

#288

Post by deckard1 »

jaredhansen wrote: post #274
deckard1 wrote: post #270

Maybe I'm hopelessly naive here, but $4M cash @ 2.65 ARR, so ~$1.5M ARR. Isn't that a bit low for SaaS at 7 years? Then there is the mention of running at breakeven most of that time. There are solo founder SaaS businesses making more than that with 80%+ margins. As others have mentioned, you'd be better off working at a FAANG. So, did something go wrong here? What is it about this analytics business that makes it so…

>~$1.5M ARR. Isn't that a bit low for SaaS at 7 years? The median and modal ARR for SaaS businesses 7 years after founding is zero.

Of course. The vast majority of all businesses fail. That's not what I'm asking. No one gets into business to just breakeven after 7 years. Most people are looking at this as a success story when it just seems like Xenon and their other investor that took a loss were doing them a favor.

Re: I sold Baremetrics

#289

Post by RedditKon »

feral wrote: post #249
georgeecollins wrote: post #216

Earlier quoted context omitted.

I don't want to make any moral judgements against people making business decisions, in particular this founder for making the best deal possible. Good for him. However, no matter how much money General Catalyst or Bessemer made last year, I would not want to invest with them going forward. I get that this is only money on the margins, and they get a benefit from a write off. Still, how hard would they have had to fig…

I thought the VC was generous here. But there's some benefit to being generous. How many future founders will read that blog? If you were a founder, would it influence your choice of investor, to know if things don't work out, they will be magnanimous, rather than squeeze?

Exactly this.

It isn't worth it for either of those funds to play hardball over $400k when hundreds of founders will read that, and will ultimately decide if they want the fund on their cap table for the next Uber/Lyft/Data Dog/Airbnb/etc.

I said it before, but it's worth repeating - SV runs on relationships.

Re: I sold Baremetrics

#290

Post by temp667 »

Sodman wrote: post #265
karimf wrote: post #200

Earlier quoted context omitted.

Relevant tweet from the author: https://twitter.com/shpigford/status/1326162432989990912

I see this "HN is toxic" sentiment on tech twitter a lot, particularly from tech folks on twitter with a lot of followers and fans. My own experience on HN has been that folks may be more cynical than average, and sometimes lacking empathy, but I've found most arguments are at least made based on reality, facts and good faith. Those that aren't usually get downvoted and/or flagged pretty quickly. Meanwhile twitter th…

On HN every action by anyone is seen as some evil plan.

Apple wants to alert users to genuine / non-genuine batteries (to mention latest downvote blast). That is evidence of how evil apple is (not even considering how many folks were getting screwed by all the trash batteries going into iphones pretending to be real).

Zoom is so evil for X/Y/Z reason - except zoom is actually easy to use which is what most non HN folks care about - so their "evil" is just optimizing for different goals in some cases.

The negativity and the myopic focus on personal need / preferences really highlights sometimes how just out of touch with the rest of the broader world HN can be.

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