Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

I sold Baremetrics

baremetrics.com

Post reply on HN
Print view View original

361–370 of 521 posts

Re: I sold Baremetrics

#361

Post by jariel »

nemothekid wrote: post #240
connectsnk wrote: post #219

Can someone please explain why the investors were not able to recoup their initial investment of 800K$ when the company sold for 4 million? Thanks in advance.

It's not that they weren't able to. It's that the 800k isn't worth the legal fees and the possible PR damage (Bessemer doesn't want to be known as non-founder friendly because they made a fuss over 800k). It's been repeated a couple times in this thread, but VC make money by 10x-100x their original investment. They invested 800k expecting to make back 8M-80M. Anything less than that isn't worth the additional time, e…

It is absolutely not 'non founder friendly' for a VC to go after their 'participating' value especially when there is actually money on the table.

There would be zero negative PR fallout from that.

This founder basically ripped off his investors, it's completely unethical - and he'll never get a dime of VC money again.

If VC firms didn't care about getting their 1x money out then the terms wouldn't be there in the first place.

It's normal to do that, and a $500M firm returning 10% a year takes 20% of that, so 2% which is not really a huge amount of money for a team of people.

Re: I sold Baremetrics

#362

Post by kjksf »

jariel wrote: post #353
RedditKon wrote: post #298

Earlier quoted context omitted.

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 thi…

Reading between the lines, this deal wouldn't happen if investors didn't agree to write off their investment.

So their choice was between nothing today or nothing later.

Tax-wise it was probably better to write it off now than carry a zombie investment into the future.

Like you said: their investment was a transaction and they made rational choice.

It's the emotional "we can't loose money" or "how dare the founder sell without us getting a cut" that would be a worse choice.

Re: I sold Baremetrics

#363

Post by ayewo »

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…

VC runs on relationships, at least this is true for top-drawer firms like Sequoia. In fact, early this year Sequoia gifted its original $21m investment in Finix Payments after it discovered new information that Finix could be a potential competitor to an existing portfolio company (Stripe).

https://techcrunch.com/2020/03/09/sequoia-is-giving-away-21-...

Re: I sold Baremetrics

#364

Post by TuringNYC »

ericd wrote: post #342
TuringNYC wrote: post #258

Earlier quoted context omitted.

Selecting at random, i'd disagree with you. Selecting with loaded dice sounds intriguing. Can you please share some high level selection criteria to evaluate potential startup employers? The only one i follow is repeat-founder-previous-exit.

Like investing in companies, its not a list of hard and fast criteria. You have to ask yourself if you could reasonably see this company being huge ($10B+) - do they have a great product? Does this have an aha! feel like Stripe and Dropbox did at their public launches? Do the founders really understand their market well? What are the risks - is this a hardware startup in a totally new market? Is the market saturated?…

Thanks for the detail.

For everyone else, the last point is CRUCIAL

> treat it like you’re making an investment

Remember, if you are giving up a market total-comp package (e.g., 200 or 300k+) for a below-market startup package -- you are literally investing the difference. Treat the difference as an investment.

Also keep in mind, unlike public stock or real estate investments this major, you also often have no visibility into financials -- discount for that.

You also cant sell when you may need to -- discount for that also.

Unlike a property or stocks, you dont get interim dividends/yield -- discount for that also.

You may also be forced to invest heavily or forgo stock if you leave the company -- discount for that.

Re: I sold Baremetrics

#365

Post by hn_throwaway_99 »

nxmnxm99 wrote: post #300
Veen wrote: post #86

Earlier quoted context omitted.

Isn’t getting credit and cash for other people’s work exactly what you’re advocating.

Not at all, it only seems that way to you because you have zero sense of what risk/reward actually means. Employees were paid for their value determined by the market. Josh is just now being compensated for the immense amount of risk and deferred cash he gave up to build this company in the early days. There's a reason the market doesn't compensate every early employee at a meh SaaS company with millions.

> There's a reason the market doesn't compensate every early employee at a meh SaaS company with millions.

And I think the primary reason is that many early engineers don't realize what a shitty deal they're getting. The purpose of this thread is to let them know that, so eventually startups won't be able to hire employees with such shitty terms.

Re: I sold Baremetrics

#366

Post by rjyoungling »

relaunched wrote: post #346
treis wrote: post #299

Earlier quoted context omitted.

Maybe I'm just the Grinch but some rich dudes giving $800k to one rich dude doesn't warm my heart. Especially as someone who's gotten (relatively) screwed twice now when owners sold out. It also goes to the heart of how messed up our economic system can be. I can be mollified by saying that he worked hard and earned his ~$4 million by building a business. But I can't internally justify the VCs gifting him $800k for A…

It's hard to understand, when taken at face value. But, when you add a little context, VCs can do much worse. They can refuse to sell (through approval rights) and let company die on a the vine. They can force out existing leadership and bring in new leadership. They can force an acquisition. They can kill a company in a million different ways. For a fund to realize that the company can live on, even if it's not the…

I agree, and honestly, I think we can take it further than that.

Because if we set the bar at curing cancer (not that that's what you were doing my friend), then nothing is meaningful. I get that that's a more pragmatic/logical perspective but I believe that change starts small. So it's key to be very vocal about great things they we perceive as small because that can create ripple effects.

I worry when we bash people that do good things with some variation of "Good, But Not Good Enough!" [1] Because, it doesn't inspire people to do even better. In fact, it creates the opposite behavior "why should I even bother at all, can't win with these people."

[1] https://www.youtube.com/watch?v=-0lzyUOjvFw

Re: I sold Baremetrics

#367

Post by infinite8s »

falcolas wrote: post #174
dbbk wrote: post #94

Earlier quoted context omitted.

I assume they also got paid in that time? You're making it sound like they've made a big sacrifice to (only) receive $80K at the end.

So was the founder. SV level salary, per their words. And, as I've said elsewhere, startup salaries are rarely on par with the industry average. Working at a startup is typically sold as "you'll be paid less, but if we sell you'll get a payout to make up for it".

Are you sure that Baremetrics employees were sold that? If not then what is your issue?

Re: I sold Baremetrics

#368

Post by davidwparker »

part1of2 wrote: post #350
relaunched wrote: post #154

This warmed my heart. >>>General Catalyst’s (who had the lion’s share of that $800k) response showed just how classy they are: “We recognize the work that’s gone into the past 7 years and it sounds like this is a great landing spot for the team. We’re grateful for the opportunity to have supported you along the way.”

I read the post but didn’t understand why they had to walk. Why did they not get their $800k back?

The didn't have to walk. Those chose not to, as $800k isn't worth the time/money for them (see others' post on the size of their funds).

Supporting the founder (and earning goodwill for it) is probably worth a lot more.

Re: I sold Baremetrics

#369

Post by jariel »

kjksf wrote: post #362
jariel wrote: post #353

Earlier quoted context omitted.

"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 thi…

Reading between the lines, this deal wouldn't happen if investors didn't agree to write off their investment. So their choice was between nothing today or nothing later. Tax-wise it was probably better to write it off now than carry a zombie investment into the future. Like you said: their investment was a transaction and they made rational choice. It's the emotional "we can't loose money" or "how dare the founder se…

Either way he's definitely ended his entrepreneurial career. Nobody is going to put a dime into a guy who does that - the risk that he'd do something much grander when the stakes are much higher is obviously there.

He should have sold the company, honoured the terms of his agreement.

Re: I sold Baremetrics

#370

Post by treis »

relaunched wrote: post #346
treis wrote: post #299

Earlier quoted context omitted.

Maybe I'm just the Grinch but some rich dudes giving $800k to one rich dude doesn't warm my heart. Especially as someone who's gotten (relatively) screwed twice now when owners sold out. It also goes to the heart of how messed up our economic system can be. I can be mollified by saying that he worked hard and earned his ~$4 million by building a business. But I can't internally justify the VCs gifting him $800k for A…

It's hard to understand, when taken at face value. But, when you add a little context, VCs can do much worse. They can refuse to sell (through approval rights) and let company die on a the vine. They can force out existing leadership and bring in new leadership. They can force an acquisition. They can kill a company in a million different ways. For a fund to realize that the company can live on, even if it's not the…

>VCs can do much worse.

It's, more or less, impossible for them to do worse than $0.

I get that there's some scenarios where they're not going to make money but the business can be viable as a lifestyle type business. But someone is buying this one for $4 million cash. So this isn't giving someone a company worth 0. This is handing out 800k+ in cash.

Post reply on HN