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Cause the investors are going, "that's not what I'm giving you money for! shut it down! SHUT IT DOWN for the love of god!"

Jasper_ 7y ago
The investors would prefer to lose their money entirely than get it repaid over a longer period of time?
- koopuluri 7y ago
  If an investor bet on a founder that they could produce billion dollar returns in a 10 year time span for their investment, they would much rather have the founder work on another idea / direction that could potentially result in the crazy returns. You can never reach that level returns if a business is sitting at 50k/mo.
  - toomuchtodo 7y ago
    Then sell the business for a reasonable multiple, don’t shut it down.
- nemothekid 7y ago
  Yes, or more specifically, Venture Capitals would.
- decentralizedX 7y ago
  I actually think so, because of how the vc funds and balance sheets are structured. The only thing they care about is the one or two startups that will return the entire fund.
- robhunter 7y ago
  There is a significant time value of money effect at play here - better to get the tax advantages from writing the investment off in Year 5 than getting paid back in Year 12
  - karthikb 7y ago
    They can always sell the shares back for a dollar and do the write off whenever they want.
    - frenchman99 7y ago
      If someone wants to buy the shares... even if the company is running well, if the founder has 51%, they might have no incentive to buyback.
      - sokoloff 7y ago
        Is there a founder in the world of a company that's running well who wouldn't buy back 49% (or 9% or 79%) of their shares for a dollar per investor?
        karthikb 7y ago
        Exactly. And if in 2-3 years the company is doing spectacularly well it’s now additional headroom to raise without losing control.
        sokoloff 7y ago
        Heck, it's worth more than a dollar to not have to send an investor update or answer a resulting question.
- paulsutter 7y ago
  Yes. All their returns come from 1-3 companies, while the other 40 board seats are a headache (founder squabbles, helping to hire a VP of Sales, etc) I’ve been in a VC fund for 10 years and literally all the returns are from three companies, the others make no difference whether they zero out for return 3x

Jasper_ 7y ago

The investors would prefer to lose their money entirely than get it repaid over a longer period of time?

koopuluri 7y ago
If an investor bet on a founder that they could produce billion dollar returns in a 10 year time span for their investment, they would much rather have the founder work on another idea / direction that could potentially result in the crazy returns. You can never reach that level returns if a business is sitting at 50k/mo.
- toomuchtodo 7y ago
  Then sell the business for a reasonable multiple, don’t shut it down.
nemothekid 7y ago
Yes, or more specifically, Venture Capitals would.
decentralizedX 7y ago
I actually think so, because of how the vc funds and balance sheets are structured. The only thing they care about is the one or two startups that will return the entire fund.
robhunter 7y ago
There is a significant time value of money effect at play here - better to get the tax advantages from writing the investment off in Year 5 than getting paid back in Year 12
- karthikb 7y ago
  They can always sell the shares back for a dollar and do the write off whenever they want.
  - frenchman99 7y ago
    If someone wants to buy the shares... even if the company is running well, if the founder has 51%, they might have no incentive to buyback.
    - sokoloff 7y ago
      Is there a founder in the world of a company that's running well who wouldn't buy back 49% (or 9% or 79%) of their shares for a dollar per investor?
      - karthikb 7y ago
        Exactly. And if in 2-3 years the company is doing spectacularly well it’s now additional headroom to raise without losing control.
        sokoloff 7y ago
        Heck, it's worth more than a dollar to not have to send an investor update or answer a resulting question.
paulsutter 7y ago
Yes. All their returns come from 1-3 companies, while the other 40 board seats are a headache (founder squabbles, helping to hire a VP of Sales, etc) I’ve been in a VC fund for 10 years and literally all the returns are from three companies, the others make no difference whether they zero out for return 3x