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Maybe this is partially a personality thing, but my biggest fear with starting a VC-backed co is that you're effectively trapped as soon as you accept money eve

by temp1928384 8y ago

Maybe this is partially a personality thing, but my biggest fear with starting a VC-backed co is that you're effectively trapped as soon as you accept money even if your company goes nowhere. If your burn rate is low, you could just exist for years without accomplishing much of anything.

kozikow 8y ago
For most startup founders, there is an alternative cost of well over $100K salary as an employee, especially for technical founders in the Bay Area. So lingering for many years is not so great of an option.
- temp1928384 8y ago
  I'm looking at https://yclist.com/ https://yclist.com/ (no idea how updated or accurate it is) and seeing a lot of companies are have been around for years and not dead or acquired that I've never heard of. I'm mostly referring to cos that have raised another seed or series A for a few mil and then just sort of lingered. I do not know of every 100 cos how many successfully raise another seed or series A beyond what YC provides (I would assume many do)
- nostrademons 8y ago
  Liquidation preferences can dramatically change the math on how big an acquisition needs to be to be profitable for the founders. Say you've got 3 founders who each want to make at least $2M for a startup they've been toiling away at for 5 years which has built something kinda-sorta useful but not a huge hit (that's roughly equalling what they would've made at Google/Facebook). If they took a $5M Series A at $15M post with 1x participating preferred, they need to sell for ~$17M to hit their target (the VC gets their $5M back, then $4M of the remaining $12M for their for their 33%, then 20% goes to the employees from the option pool, then the founders split the remaining $6M). If they took no funding, they need to sell for $6M. If they took just angel/seed funding for 25% of the company, $8M. It's generally a lot easier to get acquihired for $1-2M/head than for $5M/head.

kozikow 8y ago

For most startup founders, there is an alternative cost of well over $100K salary as an employee, especially for technical founders in the Bay Area. So lingering for many years is not so great of an option.

temp1928384 8y ago
I'm looking at https://yclist.com/ https://yclist.com/ (no idea how updated or accurate it is) and seeing a lot of companies are have been around for years and not dead or acquired that I've never heard of. I'm mostly referring to cos that have raised another seed or series A for a few mil and then just sort of lingered. I do not know of every 100 cos how many successfully raise another seed or series A beyond what YC provides (I would assume many do)
nostrademons 8y ago
Liquidation preferences can dramatically change the math on how big an acquisition needs to be to be profitable for the founders. Say you've got 3 founders who each want to make at least $2M for a startup they've been toiling away at for 5 years which has built something kinda-sorta useful but not a huge hit (that's roughly equalling what they would've made at Google/Facebook). If they took a $5M Series A at $15M post with 1x participating preferred, they need to sell for ~$17M to hit their target (the VC gets their $5M back, then $4M of the remaining $12M for their for their 33%, then 20% goes to the employees from the option pool, then the founders split the remaining $6M). If they took no funding, they need to sell for $6M. If they took just angel/seed funding for 25% of the company, $8M. It's generally a lot easier to get acquihired for $1-2M/head than for $5M/head.