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> I imagine if a company becomes enormous, I'd care less about whether my net worth was $200m or $250m as a founder As an ex-founder I never understood why peo

> I imagine if a company becomes enormous, I'd care less about whether my net worth was $200m or $250m as a founder As an ex-founder I never understood why people make this argument because it's completely symmetric. I.e. I could rephrase it as "I imagine if a company becomes enormous, I'd care less whether my outcome was $200m or $250m as a VC" I agree with the advice in the article but would phrase it slightly differently -- work hard to structure your company such that you can get away with raising as much as you need and still give away only 10%-15% each round. (Or, yet another way to put it, build a company so successful that you can dictate the terms)

lpolovets 10y ago
People do make that symmetric argument, actually :). A lot of people in the ecosystem, both founders and VCs, will say things like "investors shouldn't be price sensitive, because if you've found the next Uber, it doesn't matter if you get in at a $10m cap or a $15m cap."
- crdb 10y ago
  What is your response to that argument?
  - bytecodes 10y ago
    If you've found the next Uber, that's exactly when it matters.
  - lpolovets 10y ago
    To be completely honest, I don't really view things from that frame. I think more about 1) how much does this company need to execute on their plans? and 2) what would a fair valuation be given their current progress and market comps? If that's 10% dilution then that's fine. If that's 25-30% dilution that's also fine -- but more dilution would be scary. Usually it's 20-25% dilution -- e.g. a fair pre-valuation might be $6m, and the company wants to raise $1.5m or $2m for 18 months to do X, Y, and Z. If the valuation feels unreasonably high then I'll try to negotiate, or I'll just pass. If the valuation is low and results in too much dilution, then I'll try to figure out with the founder if they can make progress with less money/dilution, or I'll just pass -- because overdiluting sucks for the founder and will also eventually suck for me as an investor by capping the upside. I think this framing works for the founder, too: if you need $X for your near term plans, and you're getting a fair valuation that doesn't overdilute you, then that's good. If the valuation is unfairly low, try to find other options. If it's unreasonably high, then that's okay if you are good with cash management -- but be mindful that the higher your current valuation, the higher investors' expectations will be for your next round.

lpolovets 10y ago

People do make that symmetric argument, actually :). A lot of people in the ecosystem, both founders and VCs, will say things like "investors shouldn't be price sensitive, because if you've found the next Uber, it doesn't matter if you get in at a $10m cap or a $15m cap."

crdb 10y ago
What is your response to that argument?
- bytecodes 10y ago
  If you've found the next Uber, that's exactly when it matters.
- lpolovets 10y ago
  To be completely honest, I don't really view things from that frame. I think more about 1) how much does this company need to execute on their plans? and 2) what would a fair valuation be given their current progress and market comps? If that's 10% dilution then that's fine. If that's 25-30% dilution that's also fine -- but more dilution would be scary. Usually it's 20-25% dilution -- e.g. a fair pre-valuation might be $6m, and the company wants to raise $1.5m or $2m for 18 months to do X, Y, and Z. If the valuation feels unreasonably high then I'll try to negotiate, or I'll just pass. If the valuation is low and results in too much dilution, then I'll try to figure out with the founder if they can make progress with less money/dilution, or I'll just pass -- because overdiluting sucks for the founder and will also eventually suck for me as an investor by capping the upside. I think this framing works for the founder, too: if you need $X for your near term plans, and you're getting a fair valuation that doesn't overdilute you, then that's good. If the valuation is unfairly low, try to find other options. If it's unreasonably high, then that's okay if you are good with cash management -- but be mindful that the higher your current valuation, the higher investors' expectations will be for your next round.