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I sold Baremetrics

baremetrics.com

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Re: I sold Baremetrics

#351

Post by part1of2 »

cj wrote: post #322
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?

> So the investors just accepted to lose $800k $500k came from a fund General Catalyst set up specifically to encourage startups to build new businesses that integrate with Stripe. [0] The goal for the money was to enrich the Stripe ecosystem. Not generating returns for investors. If the money came from a regular fund without the Stripe affiliation, General Catalyst 100% would not have accepted the $800k loss. [0] ht…

This is what I came here to find. Thanks!

Re: I sold Baremetrics

#353

Post by jariel »

RedditKon wrote: post #298
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…

You don't win 100x-ers by squeezing founders over tiny exits. VC funds have a duty to their LP base to maximize returns, but I would argue the good will generated by moves like this are what protect their ability to get into "hot" companies and thus protect those returns. Pursuing your strategy would likely harm the fund's reputation and their ability to return LP capital in the future. Also - a point of nuance. VCs…

"squeezing founders over tiny exits."

They are not 'squeezing' remotely.

Otherwise, there would be not such thing as 1x participating in the deal in the first place.

Getting your $800K back while the founder gets $3M is not 'squeezing' it's literally just a transaction.

Also - a founder negotiating a price outside the valuation of the shares is getting very close to illegal (Conrad Black went to jail for this).

I think the founder was actually lucky that the funds simply didn't care.

Re: I sold Baremetrics

#354

Post by ceejayoz »

bluedevil2k wrote: post #295
ceejayoz wrote: post #96

Earlier quoted context omitted.

It's probably a mistake to assume he'll never earn another penny in income outside this payment.

That’s what retirement means and it’s what he indicated in the story.

That's not necessarily what retirement means, and it's not what he indicated in the story.

> I don’t have any specific plans for what I’ll be doing next, other than not doing any kind of software for a while. I’m itching to create more tangible things, especially art and music, so I’ll likely put a lot of effort in to exploring those things more.

Nothing in there says the art/music can't make any money, nor does he rule out software again in the future. As he notes, "I absolutely love starting things..."

Retirement frequently means something different for a 30-something CEO who just exited ("I don't have to work") versus a 70-something year old ("I'm done working").

Re: I sold Baremetrics

#355

Post by ceejayoz »

bluedevil2k wrote: post #293
fortydegrees wrote: post #90

Earlier quoted context omitted.

Even if he didn't earn any interest and never earned another penny, at an $85k/yr burn, that $3M will last 35 years. Seems alright?

What happens when he lives 36 years?

> Even if he didn't earn any interest

Hopefully he puts some of it in interest-earning stuff prior to that point.

Re: I sold Baremetrics

#356

Post by jariel »

cbozeman wrote: post #341
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…

You are wrong. But its not the business that you don't understand, its people. The age-old adage, "There's two kinds of people in the world..." applies to an enormous amount of traits, but here's one where its exceptionally true: The kind of people who become VCs and have billions of dollars of AUM (assets under management) understand time-value of money calculations, and they understand them almost intuitively. $800…

"engaging the machinery to recoup this $800,000 investment will incur significant financial costs, " ?

How? They write 1x participation into most contracts, and that's the normative expectation. It's not a 'legal battle' is literally a normal transaction between parties.

$1M is not 'nothing' to a firm with $500M under management - that $500M is not their money, it's other people's money.

If they are getting a %10 return for their LPs at $50M a year, and they are keeping 20% of the upside, which is $10M. So the $1M loss comes out of the fund, not their pockets, but still, $10M/year gross revenue doesn't 'feel' like a huge company now does it? A lot of these VC's are just 'rich' not 'rich rich' like mega-exist founders, just for some perspective.

Re: I sold Baremetrics

#357

Post by zaroth »

skrebbel wrote: post #97

At the time I write this comment, half my screen is full of people calling Josh not so nice things. Folks, this is a founder who's openly sharing the kinds of things we usually keep hidden. I doubt there's been a startup exit in the last decade where a healthy skeptical HN'er couldn't find some wrongs being done, if the details had been available. It's extremely hard to get everything right, from every perspective. T…

Ctrl-F for 'Salary' and you will understand what really happened. How many years did Josh work for $0 or just below market salary, take no money out of the company, in fact likely dump significant quantities of his own money into the company... all the while his employees enjoyed getting paid a agreed upon amount every pay period?

$4mm after tax (hopefully Josh is getting the QSBS tax break) for a decade of extremely high risk high effort contribution to our economy is not a good risk-adjusted return, but it's at least a decent exit at the end of the day.

Re: I sold Baremetrics

#358

Post by nebulous1 »

ccmcarey wrote: post #5

I've always loved the transparency and frank writings by Baremetrics. > As part of the structure of the deal, Xenon guaranteed I’d take home $3.7m, regardless of what came up during due diligence Interesting, I wonder how this is structured - surely there are items that can come up during due diligence that are deal-breakers for Xenon, and surely due-diligence is performed before the contract is closed? > But they we…

Apparently the investment was all or mostly through a SAFE. https://en.m.wikipedia.org/wiki/Simple_agreement_for_future_...

I only know what's on that Wikipedia page, but it doesn't look like it's as simple as the investor owning a stake, rather there are events that have to be triggered first which were perhaps very unlikely to be triggered.

Re: I sold Baremetrics

#360

Post by falcolas »

intev wrote: post #284
falcolas wrote: post #165

Earlier quoted context omitted.

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, bu…

If Google can reward a cook, why can't a meat processing plant reward a butcher? Masters at their craft deserve to be rewarded when businessmen rely upon them to succeed.
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