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

441–450 of 521 posts

Re: I sold Baremetrics

#441

Post by probe »

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…

I don't think OP's points would - VC really is about getting into 100x deals, and the "cost" multistage funds would take on to do that is quite high.

See Sequoia walking away AFTER giving $21M funding b/c of a conflict of interest with Stripe - https://techcrunch.com/2020/03/09/sequoia-is-giving-away-21-...

Re: I sold Baremetrics

#442

Post by bigiain »

robertlagrant wrote: post #431
part1of2 wrote: post #350

Earlier quoted context omitted.

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

I assume the deal he negotiated with the buyer meant he got money and they didn't, and thus that was the only thing on offer.

I doubt the buyer cared one way or another whether the previous investors got their $800k back or not.

I'm guessing it's more that the buyer was only prepared to go to 4mil, and the _seller_ had run their numbers and came to the conclusion "4mil minus that $800k isn't enough to secure my families future, and I'd need to walk away from the deal unless they agree to forgive that $800k" so he asked them, and they agreed.

Re: I sold Baremetrics

#443

Post by icedchai »

dbbk wrote: post #94
falcolas wrote: post #36

Earlier quoted context omitted.

$80k for how many years of work? Unless it’s one, I’m with the parent. I’m sure it’s all legal and ‘equitable’ according to the terms, but that’s peanuts of a return for somewhere between 4 and 7 years of work (based off a typical vesting schedule).

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.

Most startup employees don't even get 80K. My last "exit" as an early employee was barely 20K. I doubt my current startup will be any better. I look at this as a "bonus" and not anything that was expected. The average startup employee will be lucky to get non-zero.

If you want "returns", you're better off getting a stable, higher paying job and investing the excess in public markets. You have diversification and liquidity.

Re: I sold Baremetrics

#444

Post by bigiain »

sonofaragorn wrote: post #420
fairity wrote: post #374

Everyone's talking about how the founder got lucky that his investors let go of their $800K liquid preference. My guess is that this wasn't all luck. The VC's in this case knew how transparent this founder was being in reporting his startup journey. They knew that this decision would get publicity. With this knowledge, the VC firm probably made a calculated decision to forego their liquid pref in return for the good…

If letting go the $800k was purely PR, then that's some expensive PR. Who reads these blogs, a couple thousand people maybe?

There's a _huge_ difference in the PR value for General Catalyst of a couple of million random New York Times readers compared to a couple of thousand HackerNews readers.

This is _brilliantly_ targeted PR. (To the extent that I suspect part of the deal with General Catalyst was that he blog about it and do his best to get it on the front page here...)

Re: I sold Baremetrics

#445

Post by nkingsy »

franciscomello wrote: post #156
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…

Through the investors' eyes, "the proceeds from the sale wouldn't even pay for our time and legal fees in reviewing and signing the transaction documents." That's basically it.

Having been through a xenon acquisition, their strategy is entirely based upon arbitrage of vcs’ total lack of interest in non-unicorns.

Re: I sold Baremetrics

#446

Post by pkrotich »

cj wrote: post #316
alex_c wrote: post #268

I was incredibly confused to read " Investors are writing off their $800,000 investment ". Sure, $800K isn't huge money for a fund, but it still seems... odd... to be so nonchalant about it? Then I checked General Catalyst, they manage multiple funds in the $500M - $1B range[1]. In that context the $800K really is a rounding error, around 0.1% of a single fund's size. It never ceases to amaze me how money stops being…

I imagine there must be a bit more to the story. It's not common for investors to write off $800k out of good will (doesn't seem like something in the best interest of their LPs). Edit: > It’s a really exciting day here at Baremetrics! I’m stoked to announce that General Catalyst has invested $500,000 in Baremetrics, as part of a new fund they’ve created for businesses on Stripe. Turns out there is more to the story.…

Interesting - I truly expected Stripe to buy Baremetrics.

Re: I sold Baremetrics

#447

Post by bigiain »

ska wrote: post #433
jariel wrote: post #356

Earlier quoted context omitted.

"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 re…

I think it's a mistake to assume that the VC had the choice between this deal with our 800k recouped, or the same deal without it. The real choice was likely this deal where we let the 800k go, or future uncertainty. This isn't "rich people don't care about 800k". This is more like "400k write down makes sense at this time".

> The real choice was likely this deal where we let the 800k go, or future uncertainty

And not just "future uncertainty", but "the future of a company that's spent 7 years trying and doesn't look any closer to launching the rocketship, who's founder is onto his second attempt to sell out, and clearly is out of enthusiasm and ideas".

There was no 3x or even 2x future here for them, certainly no 100x - there was just another 2, 5, or 10 years of slow flameout with a 0x - or a quick and tidy 0x with a significant PR goodwill upside.

Re: I sold Baremetrics

#448

Post by bigiain »

hedgehog wrote: post #286
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…

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 e…

Also, it just occurs to me - I wonder if Josh and Baremetrics have _already_ helped these the VC firms our with enough deal referrals, contact, networking, and deal closing ammunition (and I suspect not, but given this is SV, data on other startups that was not publicly available but that Baremetrics was collecting?) - that made it an easy choice for them to say "Sure! We're totally happy with everything you've done for us overt the last 7 years already. Thanks man!"

Re: I sold Baremetrics

#449

Post by bigiain »

Jochim wrote: post #421
fairity wrote: post #417

Earlier quoted context omitted.

> I thought that his open stance on what he'd been doing would mean he'd being open to people criticising what he'd done His goal in publishing this information seems to be to foster a community of transparency. To that end, his actions appear entirely consistent. Put another way, what additional information do you want him to convey? His goal is to accurately and openly convey information, and he's basically laid it…

> You're free to have an opinion on whether his actions were right or wrong, but don't expect him to engage with your criticism when that takes a lot of time and effort (and is not part of his goal). I don't expect him to engage at all. I do think he should be able to handle dissenting opinions without merely dismissing the whole site as toxic on twitter.

> without merely dismissing the whole site as toxic on twitter.

You are aware that he's not, not by a long shot, the first to have that opinion? There's _way_ more than an element of truth in it.

Re: I sold Baremetrics

#450

Post by jariel »

RedditKon wrote: post #394
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…

re: 1x participating Straw man argument. 1x participating are standard terms. I'm not sure why any investor would forego using standard terms, even at the early stage, to their detriment. re: "squeezing" You're perfectly free to have that opinion. Clearly both firms with extensive investment experience did not feel that way. re: "illegality" I have no idea what parallel you're making here, or what "negotiating a pric…

>>> '1x participating' are the likely standard terms, meaning the investors should be getting their 1x out of this deal at least.

There's no 'straw man'.

>>> Asking for the 1x back on a sale is not 'squeezing' - it's literally in the contract, a normative part of these transactions. It happens all the time.

"Clearly both firms with extensive investment experience did not feel that way." - no, that they didn't 'go after the money' doesn't imply they would be 'squeezing' if they did. What it implies is that in all likelihood, it probably just wasn't worth the hassle.

The investors got robbed, but at least they can write it off. Asking for money from someone who is essentially refusing to give it back to you is not 'squeezing' by any definition.

>>> "Illegality" - in the article Josh mentioned that he had some kind of deal with the acquirer whereby 'not matter what, he would get his $3.7M'. If the acquirer is agreeing to terms with one 'insider shareholder' to the detriment of the others, that's fraud, and it's illegal.

Josh has a fiduciary responsibility to represent in good faith on behalf of all of the shareholders. Clearly in this situation, he came out with a nice exit, while his investors got $0. It also seems pretty clear that Josh and the acquirer were going to make sure that Josh was 'taken care of as part of the deal'.

Conrad Black went to jail because he was selling off assets of the company, but also getting a large 'consulting fee' from the acquiring entity to him personally. The shareholders felt that was defrauding them of what would otherwise be valuation/money they should receive.

In this companies transaction, it seems pretty clear that the investors were probably into it for $800K (participating) and then 15% or whatever they owned - but they got nothing.

He benefited while the other shareholders did not - this looks like it might illegal - but it probably would only be considered so if someone took them to court over it, which obviously they wont.

It's a fine line between 'negotiating hard' and simply saying 'I have your money, you're not going to get it, so that's that'.

Post reply on HN