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I don't think it's a double edged sword, if there are more financiers there's more competition, and if it's institutionalized then terms and all become more eas

I don't think it's a double edged sword, if there are more financiers there's more competition, and if it's institutionalized then terms and all become more easily compared. I think you're much more likely to get a good deal when there are multiple investors than when you have to count on the goodwill of the one investor you have access to

jedberg 7y ago
It's an oligopoly though. The investors know each other's terms, they have no reason to compete on that aspect. They compete on other aspects, like their network with access to potential acquirers and access to subject matter experts. They don't really compete on terms, other than valuation. If anything, as things become more transparent, the deal terms are becoming more homogenized.
- vikramkr 7y ago
  I don't think homogenized is a bad thing though, it standardizes the process, and with swings in the market (e.g. emergence and dissapearance of SoftBank) we see deals change accordingly. By all accounts terms have changed dramatically from what they used to look like in the 80s to now, and an oligopoly is not a monopoly. Founders have some semblance of market power now, and with increased transparency people know what they're getting into and are able to make sure they're getting a deal on par with what they deserve. The competition on valuation is probably the most important part now given that most other terms are standardizes and generally founder friendly (and I don't think terms are as homogeneous among all investors as you might think, there are some crazy termsheets out there...)
  - jedberg 7y ago
    The terms are founder friendly, but they are no longer employee friendly. All the value that used to go to employees goes to VCs now. It's a lot harder to hire good employees when they look around and see that they have a much better chance of an equity payout with RSUs from Google.
    - vikramkr 7y ago
      And if that proves out to be problematic for companies (markets aren't instantly efficient, it takes time for information to be incorporated), I think we'll see terms shift to provide portfolio companies a competitive advantage in hiring
      - jedberg 7y ago
        That’s not how the real world works. Just like employee wages don’t magically go up when a few employers pay more, it is unlikely that things will shift in employees favor. The situation now will just be the new normal.
        vikramkr 7y ago
        Then in that case, the employees aren't actually providing value to be worth the favorable terms in term sheets and aren't providing a real competitive edge and so aren't worth negotiating better terms for. I don't think that's the case, and if employees provide a real competitive advantage, then companies will need to be able to attract them to survive. I don't see a world where in the long run (and I admit that could be decades - it took that long for terms to become founder friendly) employees don't get more power if they actually bring value. All it takes is a few years of wework style Fiasco's where the founder walks away with a huge payday and workers get screwed before workers start negotiating harder, and founders that can oblige would be in a better position. And frankly, if that ends up not mattering for company success, then the employees clearly aren't worth getting employee friendly terms. I don't think that's the case though.
        UweSchmidt 7y ago
        That world would be one with an oligopoly. In this scenario less overall value would be created (through the absence of good startup employees), but oligopolists benefit (as each of their deals is safe and profitable).
        7y ago

jedberg 7y ago

It's an oligopoly though. The investors know each other's terms, they have no reason to compete on that aspect. They compete on other aspects, like their network with access to potential acquirers and access to subject matter experts. They don't really compete on terms, other than valuation. If anything, as things become more transparent, the deal terms are becoming more homogenized.

vikramkr 7y ago
I don't think homogenized is a bad thing though, it standardizes the process, and with swings in the market (e.g. emergence and dissapearance of SoftBank) we see deals change accordingly. By all accounts terms have changed dramatically from what they used to look like in the 80s to now, and an oligopoly is not a monopoly. Founders have some semblance of market power now, and with increased transparency people know what they're getting into and are able to make sure they're getting a deal on par with what they deserve. The competition on valuation is probably the most important part now given that most other terms are standardizes and generally founder friendly (and I don't think terms are as homogeneous among all investors as you might think, there are some crazy termsheets out there...)
- jedberg 7y ago
  The terms are founder friendly, but they are no longer employee friendly. All the value that used to go to employees goes to VCs now. It's a lot harder to hire good employees when they look around and see that they have a much better chance of an equity payout with RSUs from Google.
  - vikramkr 7y ago
    And if that proves out to be problematic for companies (markets aren't instantly efficient, it takes time for information to be incorporated), I think we'll see terms shift to provide portfolio companies a competitive advantage in hiring
    - jedberg 7y ago
      That’s not how the real world works. Just like employee wages don’t magically go up when a few employers pay more, it is unlikely that things will shift in employees favor. The situation now will just be the new normal.
      - vikramkr 7y ago
        Then in that case, the employees aren't actually providing value to be worth the favorable terms in term sheets and aren't providing a real competitive edge and so aren't worth negotiating better terms for. I don't think that's the case, and if employees provide a real competitive advantage, then companies will need to be able to attract them to survive. I don't see a world where in the long run (and I admit that could be decades - it took that long for terms to become founder friendly) employees don't get more power if they actually bring value. All it takes is a few years of wework style Fiasco's where the founder walks away with a huge payday and workers get screwed before workers start negotiating harder, and founders that can oblige would be in a better position. And frankly, if that ends up not mattering for company success, then the employees clearly aren't worth getting employee friendly terms. I don't think that's the case though.
        UweSchmidt 7y ago
        That world would be one with an oligopoly. In this scenario less overall value would be created (through the absence of good startup employees), but oligopolists benefit (as each of their deals is safe and profitable).
        7y ago