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Taking money off the table

zachholman.com

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Re: Taking money off the table

#71

Post by defen »

vlucas wrote: post #14
mason55 wrote: post #7

A 10% tender offer isn't really an interesting discussion. You should take definitely take 10% off the table unless you're already pretty wealthy. The interesting discussion is how much you should take off the table if the offer is uncapped.

100% correct. Taking 10% away to remove downside risk of the remaining 90% is an absolute no-brainer, especially if it is a meaningful sum of money to you.

Indeed; I can't imagine a world where 11% higher gains makes a significant difference. Either that 11% is a large number in an absolute sense, in which case the 89% you retained is also VERY large; or it's not that big of an absolute number and doesn't matter that much anyway.

Re: Taking money off the table

#72

Post by reducesuffering »

"Jim Bennett: I've been up two and a half million dollars.

Frank: What you got on you?

Jim Bennett: Nothing.

Frank: What you put away?

Jim Bennett: Nothing.

Frank: You get up two and a half million dollars, any asshole in the world knows what to do: you get a house with a 25 year roof, an indestructible Jap-economy shitbox, you put the rest into the system at three to five percent to pay your taxes and that's your base, get me? That's your fortress of fucking solitude. That puts you, for the rest of your life, at a level of fuck you. Somebody wants you to do something, fuck you. Boss pisses you off, fuck you! Own your house. Have a couple bucks in the bank. Don't drink. That's all I have to say to anybody on any social level. Did your grandfather take risks?

Jim Bennett: Yes.

Frank: I guarantee he did it from a position of fuck you. A wise man's life is based around fuck you. The United States of America is based on fuck you. You're a king? You have an army? Greatest navy in the history of the world? Fuck you! Blow me. We'll fuck it up ourselves."

https://www.youtube.com/watch?v=XamC7-Pt8N0

Re: Taking money off the table

#73

Post by pavon »

nachox999 wrote: post #9

I believe the complete opposite. If someone is willing to buy your business, no matter the amount, it’s because it’s worth MUCH more than what they’re paying. It’s illogical for them to pay less than its real value. It’s even illogical to think they’d pay exactly what it’s worth. Why would somebody bother buying a company if they were only going to break even?

No, it means they buyer thinks it is worth more than what they are paying. It doesn't mean they are right. It also means that this is the only buyer who thinks the company is worth that much, because if someone was willing to pay more, the company would be selling to them instead.

Ideally startups are about creating value, and making a return on that value, but more and more they look like they are instead selling hype to a series of investors who are trying not to get stuck with the hot potato.

Re: Taking money off the table

#74

Post by dkural »

jocaal wrote: post #51
GCA10 wrote: post #29

There's a crucial extra factor that isn't in the original article, but ought to be: Money's ability to buy great experiences decreases as you get older. I've seen this with beach vacations, road trips to see a favorite band, fast cars, ski trips, etc. Seize the moment, friend! What you can do NOW with that 10% slice will never exactly be on your possibilities map again.

I don't agree. How can wasting your money in your twenties and thirties be more valuable than saving for an early retirement. Imagine being able to retire at 40 and do whatever you want. If you weren't stupid, your health should be good enough. Why prolong the time you have to do stupid chores for other people when you can be strategic and opt out as early as possible.

Taking some time off to travel when you're young is much more than a beach vacation. You meet people (sometimes you meet your future wife), that can become lifelong friends. You learn what you like and don't like; and that the world is infinitely more complicated and beautiful than what you could imagine through books and watching youtube.

After 40 you've already made many of your major life decisions - career, partner, education, kids etc. There's less room for new experiences to alter that trajectory meaningfully.

One thing I've also realized through being lucky enough to enjoy some "semi-retirement" between work is having a healthy balance makes me appreciate both work and "leisure" more. It gets pretty boring to go to the beach every day, it turns out. I was itching to get back to building something by the end.

Re: Taking money off the table

#75

Post by garspin »

1) Making money & keeping money are 2 different skillsets. You've made some $$$, now learn how to keep it.

2) Time is far more valuable than money. If you can take life-changing $$$ off the table in exchange for time, do so. The 2nd $1M buys you a tiny proportion of the benefits that the first $1M did.

3) You have a v. high risk concentrated portfolio that is aligned with your income. That's massive risk.

4) Taking it now buys you time & optionality. Leaving some still buys you blue sky. Best of both worlds.

Re: Taking money off the table

#76

Post by dkural »

nachox999 wrote: post #20
tyre wrote: post #15

Earlier quoted context omitted.

Almost all startups go to zero, meaning every cent what VCs paid for stock, at any price, did not end up being worth more than they paid.

Sure, what I'm getting at is that in your hands, or in the buyer's, the value can go to zero or multiply. If they buy, it's because they assess that the chances of it multiplying are greater than it going to zero. Why sell in that case?

You're selling only 10%, you still get to see the other 90% go up in value, but that 10% you sold protects you from a wipe-out.

Re: Taking money off the table

#77

Post by jaggederest »

nachox999 wrote: post #20
tyre wrote: post #15

Earlier quoted context omitted.

Almost all startups go to zero, meaning every cent what VCs paid for stock, at any price, did not end up being worth more than they paid.

Sure, what I'm getting at is that in your hands, or in the buyer's, the value can go to zero or multiply. If they buy, it's because they assess that the chances of it multiplying are greater than it going to zero. Why sell in that case?

Your intuition is wrong here. Check out the Kelly criterion and do a little math - by my math, when you have modest personal assets VCs have MUCH larger bankrolls and so their Kelly bet is proportionately larger, but not percentage larger.

Re: Taking money off the table

#78

Post by hshdhdhehd »

GCA10 wrote: post #29

There's a crucial extra factor that isn't in the original article, but ought to be: Money's ability to buy great experiences decreases as you get older. I've seen this with beach vacations, road trips to see a favorite band, fast cars, ski trips, etc. Seize the moment, friend! What you can do NOW with that 10% slice will never exactly be on your possibilities map again.

Also you might get sick. Getting sick is like going 30 to 80 in 60 seconds.

Re: Taking money off the table

#79

Post by lostlogin »

FanaHOVA wrote: post #53
jocaal wrote: post #51

Earlier quoted context omitted.

I don't agree. How can wasting your money in your twenties and thirties be more valuable than saving for an early retirement. Imagine being able to retire at 40 and do whatever you want. If you weren't stupid, your health should be good enough. Why prolong the time you have to do stupid chores for other people when you can be strategic and opt out as early as possible.

> Imagine being able to retire at 40 and do whatever you want. If you weren't stupid, your health should be good enough. Do you really believe people who have health issues at an early age are simply stupid?

There is probably a stronger argument that health issues later in life a due to being ‘stupid’.

Re: Taking money off the table

#80

Post by hshdhdhehd »

mason55 wrote: post #7

A 10% tender offer isn't really an interesting discussion. You should take definitely take 10% off the table unless you're already pretty wealthy. The interesting discussion is how much you should take off the table if the offer is uncapped.

https://en.wikipedia.org/wiki/Kelly_criterion

Obviously you are guessing probabilities to plug in but they can be based on other exits etc. Someone in the know on startup equity could offer this as a consultation service.

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