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Why I Turned Down $5 Million in VC Funding

groovehq.com

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Re: Why I Turned Down $5 Million in VC Funding

#61

Earlier quoted context omitted.

Love it or hate it, I bet it drives a lot of subscriptions. This is the service they use, btw http://bounceexchange.com/

Makes sense, it drives the bounce rate up.

ahahah, good one! I too hate popups, but I didn't see anything on the website, because adblock.

Re: Why I Turned Down $5 Million in VC Funding

#62
post #30

Earlier quoted context omitted.

Okay, so yes, you are mechanically correct in that if you sold 10% of your shares for $1m, you would get the cash not the company. However, the way funding events work in real life is that new shares are created by the company and then sold to the investors. As a very math-simple example, I have 1m shares in my company, and I own 100% of them. Some VCs want to take a ~33% share of the company for $5m. My "board" (me)…

This answers my question, thank you. I had never thought of the company itself creating more shares, this is what I was missing in my thought process.

this is also how dilution happens - more shares are issued, and then everyone with existing shares owns a smaller % of the total amount.

VCs everywhere will always prefer to work with their lawyers to make sure this goes in their favor. it pays to use your own lawyer so that all of this stuff happens on your own terms.

lawyers are responsible to the party who pay their fees, so watch out if anyone seems overly generous with helping you out with legal bills.

Re: Why I Turned Down $5 Million in VC Funding

#63

Earlier quoted context omitted.

It's not. I'm just giving a data point, as is jc4p, as is codegeek. So are the up-voters. What part of what I said gave you the impression of entitlement? I didn't say "I deserve to read this without ads". I said "I stopped reading because you put a massive pop-up that filled the entire screen and prevented me from reading it, I don't find that acceptable, and so closed the tab". Would it be better to have no feedbac…

The issue for me is derailment. Your complaint - which is unrelated to the content of this article - is now the top comment. I agree with you, but there are probably a lot of things we agree about, which are also not related to the content of this article. And regarding whether your complaint is doing the author a favor? You know, it's probably not. You're just going to discourage him from writing, because then he do…

Technically it is related to the content and usability of the page as a whole. It falls under the umbrella of feedback on the user's experience with the site.

I think it's myopic to dictate what is and isn't up for discussion, to say "well that's not the point, just ignore it." If the ad is so distracting and off-putting that the user doesn't even get to the content, that is pretty important.

And if that post rises to the top, the message is that a substantial amount of people are having a similar experience.

Re: Why I Turned Down $5 Million in VC Funding

#64
So here's a question... with the new rules around fund-raising, why wouldn't he just throw up a box to this side of this article that says something like:

"By the way... now that you've seen our numbers, if you're interested in a buying a small piece of equity in our company, leave your email address and we'll let you know terms."

Is there any downside to an approach like this? Setting your own terms and then selling equity if you find people interested?

Re: Why I Turned Down $5 Million in VC Funding

#65

So here's a question... with the new rules around fund-raising, why wouldn't he just throw up a box to this side of this article that says something like: "By the way... now that you've seen our numbers, if you're interested in a buying a small piece of equity in our company, leave your email address and we'll let you know terms." Is there any downside to an approach like this? Setting your own terms and then selling…

In this particular case, they probably still don't need the money.

Re: Why I Turned Down $5 Million in VC Funding

#66

So here's a question... with the new rules around fund-raising, why wouldn't he just throw up a box to this side of this article that says something like: "By the way... now that you've seen our numbers, if you're interested in a buying a small piece of equity in our company, leave your email address and we'll let you know terms." Is there any downside to an approach like this? Setting your own terms and then selling…

The downside is, you still have to deal with investors and all that comes with them. Dealing with a lot of small investors is often a much bigger headache than dealing with one or two large investors.

Taking on ... 300 small investors is a nightmare. They require far more work on average per dollar invested than larger investors do.

Re: Why I Turned Down $5 Million in VC Funding

#67

During the dot com boom it was a always an issue if your company took too much VC money. Having a fat bank account balance can make you lazy, you can spend on things you don't need (Aeron Chairs for Everyone!) and you don't "sweat the details." but a lot of the things startup teams need to learn how to do are the exact opposite, spend only when necessary, sweat all the details, understand where every dollar of your m…

[deleted]

Re: Why I Turned Down $5 Million in VC Funding

#68

During the dot com boom it was a always an issue if your company took too much VC money. Having a fat bank account balance can make you lazy, you can spend on things you don't need (Aeron Chairs for Everyone!) and you don't "sweat the details." but a lot of the things startup teams need to learn how to do are the exact opposite, spend only when necessary, sweat all the details, understand where every dollar of your m…

It is not just a discipline issue, it also alters your desired growth trajectory as your sole aim is no longer being a healthy profitable company; you also have to account for the endgame the investor is playing, which, more often than not, is a big exit.

As much as it is celebrated and desired in the valley, a large number of businesses don't have the mystical hockey stick as a viable option for growth. Throw enough money at it and any business can hit the hockey stick, but it won't last for too long. For every big exit that we read about, there are probably ten companies out there that attempted it and failed.

Re: Why I Turned Down $5 Million in VC Funding

#69

During the dot com boom it was a always an issue if your company took too much VC money. Having a fat bank account balance can make you lazy, you can spend on things you don't need (Aeron Chairs for Everyone!) and you don't "sweat the details." but a lot of the things startup teams need to learn how to do are the exact opposite, spend only when necessary, sweat all the details, understand where every dollar of your m…

I really dislike the specific way in which Aeron chairs have come to symbolize all that was bad about the dot-com era. The nature of that chosen symbol speaks volumes about the values our culture holds.

Spending a thousand dollars on every employee to keep them comfortable while they sit at their desk and work for your company all day?! The epitome of profligate spending! A shining example of decadence! For shame, for shame!

Re: Why I Turned Down $5 Million in VC Funding

#70
> Importantly, with eight months of runway, Groove didn’t need the money.

Geeze, stop right there.

If you need the money, IT IS TOO LATE.

You get money because you can use it, not because you need it.

Sorry if this comes off as a rant. I was at a dysfunctional start-up once and I guess it comes out at odd times.

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