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Would a company like this ever offer equity to one VC for $x and then charge a second VC $8x 2 weeks later? Honest question?
by abstene 9y ago
Would a company like this ever offer equity to one VC for $x and then charge a second VC $8x 2 weeks later?
Honest question?
- mdekkers 9y agoWould a company like this ever offer equity to one VC for $x and then charge a second VC $8x 2 weeks later? Why wouldn't they? It is pretty standard to raise different rounds at different valuations.
- elmar 9y agoyes, but some big milestones have to be achieved for a 8x time increase.
- pookeh 9y agoPublicity can happen in 2 weeks. It's like a land was up for sale. You buy it at x, dig it a bit to see it's covered with gold then put it back on sale for 8x. (Of course you may be fooling everyone that it's covered with gold but it's really not.)
- kobeya 9y agoNot really, no. "Follow-on rounds" are a thing. Usually with rounds more like 2x the valuation than 8x, but still. The last company I was at went out and raised 3x as much at 2x the valuation Series B while the ink was drying on the Series A. There was demand, so why not?
- saalweachter 9y agoHell, if nothing else the company is cash rich after the first round and less desperate for funding. You need a better offer just to convince them to dilute themselves further when they don't really need to.
- rficcaglia 9y agofirst hand knowledge that is does happen without any milestone completion or even Public PR. it's VC-VC FOMO. it is a real thing.
- regulation_d 9y agoNormally I would say, "No, that's really shady." In this case, it seems like the initial raise was almost a marketing ploy. "Look at us! We raised $50M from these big time VC firms! We must be awesome!" In my mind, it's not especially different from an IPO where banks put their names on the line to build the book and then get a percentage of the offering for effectively being the marketer.