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The extra advantage held over the VCs can be balanced by their ability to cut their losses at any time. Let's say you get $1M/month for 2%/month. If the VC ge
by GavinB 18y ago
The extra advantage held over the VCs can be balanced by their ability to cut their losses at any time. Let's say you get $1M/month for 2%/month. If the VC gets cold feet, they can pull out after a few months rather than wait for a long and expensive failure, rather than having to offer $12 Million up front for 24% of what could turn out to be nothing.
- DenisM 18y agoTrading ability to cut your losses at 50% of typical investment for inevitability of being cut off at 50% of a hugely successful return will balance out. However, a hugely successful investment will bail sooner than 50% is reached. Thus the skew is in favor of startup. Of course the actual negotiation may not take math into account. :-)