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If you are investing at that late of stage you'll likely negotiate downside protection like liquidation preferences which significantly de risk the deal. In whi

by supster 11y ago

If you are investing at that late of stage you'll likely negotiate downside protection like liquidation preferences which significantly de risk the deal. In which case a 2-10x return is actually really good b/c you are not expecting to lose all your money in your individual investments. So in a late stage portfolio you would break even on a few and hopefully make returns on one or two.

gozo 11y ago
Sure. I'm not saying it's a bad deal, just that it supports what the NYT article is saying and that the anecdote would therefor be relevant. > Within Silicon Valley, Andreessen Horowitz is famous for bidding valuations to heights that make rivals uncomfortable. To offset the dilution of ownership that comes from such prices, Andreessen Horowitz [...] increases the amount of money it invests. The firm often kicks in more than the entrepreneur asks for, according to rival V.C.s who have been involved in these deals. “They want to basically change the table stakes in a poker game,” said Greg Kidd, an angel investor in several companies Andreessen later funded. “There are some other folks who can cut checks like that, but there aren’t that many.” > More than is the case with other firms, the fate of Andreessen Horowitz may be closely tied to that of the overall tech market. If prices remain buoyant, the eye-popping valuations of the firm’s top-performing companies will keep it profitable and losses will be containable. But if the market turns, Andreessen Horowitz could have serious trouble. > Worse, Andreessen Horowitz isn’t just a beneficiary of behavior that’s driving up valuations. If a bubble is forming, it is ultimately because too much money is chasing too few companies. But the firm’s own aggressive bidding may be partly responsible. “Because there is competition for deals, when you have actors in the market showing no price discipline, it drives up the cost for everyone,” said one investor. And by the way, for completeness, the company in question sold for $2.6 billion three months after the article and post was written.

by supster 11y ago

gozo 11y ago

Sure. I'm not saying it's a bad deal, just that it supports what the NYT article is saying and that the anecdote would therefor be relevant. > Within Silicon Valley, Andreessen Horowitz is famous for bidding valuations to heights that make rivals uncomfortable. To offset the dilution of ownership that comes from such prices, Andreessen Horowitz [...] increases the amount of money it invests. The firm often kicks in more than the entrepreneur asks for, according to rival V.C.s who have been involved in these deals. “They want to basically change the table stakes in a poker game,” said Greg Kidd, an angel investor in several companies Andreessen later funded. “There are some other folks who can cut checks like that, but there aren’t that many.” > More than is the case with other firms, the fate of Andreessen Horowitz may be closely tied to that of the overall tech market. If prices remain buoyant, the eye-popping valuations of the firm’s top-performing companies will keep it profitable and losses will be containable. But if the market turns, Andreessen Horowitz could have serious trouble. > Worse, Andreessen Horowitz isn’t just a beneficiary of behavior that’s driving up valuations. If a bubble is forming, it is ultimately because too much money is chasing too few companies. But the firm’s own aggressive bidding may be partly responsible. “Because there is competition for deals, when you have actors in the market showing no price discipline, it drives up the cost for everyone,” said one investor. And by the way, for completeness, the company in question sold for $2.6 billion three months after the article and post was written.