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Good story, absolutely horrible generalization. "Shitty sticks" are usually a result of disadvantageous power dynamics, often set in place by the mistakes of p

Good story, absolutely horrible generalization. "Shitty sticks" are usually a result of disadvantageous power dynamics, often set in place by the mistakes of previous generations, and therefore not so easily flippable, given the massive number of people who benefit from keeping them in position. Take, for example, the relationship between VCs and entrepreneurs. VCs make entrepreneurs pay legal expenses, often ask for outrageous terms and returns (participating preferred, multiple liquidation preferences), and tend to demand such a degree of power as to ruin the company. That's, without debate, a shitty stick. The simplistic solution, "become a VC", doesn't make any sense. 1. Most entrepreneurs don't want to be VCs, and 2. most of them can't join that club.

lionhearted 17y ago
> That's, without debate, a shitty stick. The simplistic solution, "become a VC", doesn't make any sense. 1. Most entrepreneurs don't want to be VCs, and 2. most of them can't join that club. Well, the examples Derek gave were of starting a bank or becoming a distributor, but that's not the only way to flip the stick. When you've got a rough idea, an unproven business plan, and some smart but unproven people you're going to get bad terms, because the vast majority of rough ideas, unproven business plans, and smart but unproven people's companies flame out. You could flip that around by working up any of those - turn your rough idea into a concrete, functional product. Prove the business plan (easiest way is revenues). And then after you've had some successes under your belt, you get money at great terms in the future. The person with less leverage always gets the shit end of the stick. There's usually a lot more smart-but-unproven people with hazy unproven ideas that want financing than there is venture money to go around. Hence, bad terms. But there's also nowhere near enough companies raising money on a solid, proven growth trajectory being run by credible people. If you get that going on, you can raise crazy amounts of money on good terms. "Flip the stick" means you don't have to accept the position of lower leverage and the bad terms that come with it, the shit end of the stick. There's more ways to accomplish that than just "if you can't beat 'em, join 'em".
- pw0ncakes 17y ago
  There's usually a lot more smart-but-unproven people with hazy unproven ideas that want financing than there is venture money to go around. Hence, bad terms. Right, but bad VC terms shouldn't even exist. There are a lot of bad ideas out there and a few good ones. VCs are "supposed" to be the ones who can pick out the good deals; that's why they get paid their high salaries. If the deal is good, the terms should be good because the VC wants the founders to have high morale and a successful company. If the deal is bad, the VC shouldn't fund it at all. I wouldn't be insulted or offended if a VC rejected me. I'd expect quite a few rejections. Multiple liquidation preferences are an insult; it says "we think you're fucking pathetic; here are some scraps".

lionhearted 17y ago

> That's, without debate, a shitty stick. The simplistic solution, "become a VC", doesn't make any sense. 1. Most entrepreneurs don't want to be VCs, and 2. most of them can't join that club. Well, the examples Derek gave were of starting a bank or becoming a distributor, but that's not the only way to flip the stick. When you've got a rough idea, an unproven business plan, and some smart but unproven people you're going to get bad terms, because the vast majority of rough ideas, unproven business plans, and smart but unproven people's companies flame out. You could flip that around by working up any of those - turn your rough idea into a concrete, functional product. Prove the business plan (easiest way is revenues). And then after you've had some successes under your belt, you get money at great terms in the future. The person with less leverage always gets the shit end of the stick. There's usually a lot more smart-but-unproven people with hazy unproven ideas that want financing than there is venture money to go around. Hence, bad terms. But there's also nowhere near enough companies raising money on a solid, proven growth trajectory being run by credible people. If you get that going on, you can raise crazy amounts of money on good terms. "Flip the stick" means you don't have to accept the position of lower leverage and the bad terms that come with it, the shit end of the stick. There's more ways to accomplish that than just "if you can't beat 'em, join 'em".

pw0ncakes 17y ago
There's usually a lot more smart-but-unproven people with hazy unproven ideas that want financing than there is venture money to go around. Hence, bad terms. Right, but bad VC terms shouldn't even exist. There are a lot of bad ideas out there and a few good ones. VCs are "supposed" to be the ones who can pick out the good deals; that's why they get paid their high salaries. If the deal is good, the terms should be good because the VC wants the founders to have high morale and a successful company. If the deal is bad, the VC shouldn't fund it at all. I wouldn't be insulted or offended if a VC rejected me. I'd expect quite a few rejections. Multiple liquidation preferences are an insult; it says "we think you're fucking pathetic; here are some scraps".