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It didn't completely happen. Only some of the investors sold their shares back for $1. But in general, quite a few investors seem to be willing to get rid of th
by hobofan 7y ago
It didn't completely happen. Only some of the investors sold their shares back for $1. But in general, quite a few investors seem to be willing to get rid of their shares (cheaply), once it turns out that the business won't scale, and the founders want to continue running it as a lifestyle business.
From the article:
> I am following up our conversation a few months ago. KP would like to sell our ownership back to Gumroad for $1. Can we discuss this week?
> Mike had left KPCB to start a new company, and KPCB didn’t want the operational headache of appointing a new board member. Plus, it helped their taxes.
> One investor joined them. We’ve bought back a couple more, since then. I keep the rest of the investors up-to-date with a brief email every few months.
- jacurtis 7y agoVC's don't mind losing money if they can control when they lose it. They can use losses (selling shares back for $1) during the same year that they have big gains (maybe they won big on Uber that year) and they can offset capital gains taxes which will sometimes justify a loss they took on another investment. In the case of the Gumroad guy, this is exactly what he did/ He basically let VCs choose when they took their losses once they realized Gumroad wasn't going to be the next Facebook. They used the losses to offset some huge wins they got on other investments. The VC walks away happy because he exchanged otherwise useless stock to increase his returns on something else he sold that he did really good on. The owner of Gumroad walks away happy because he gets his company back. Win-win for everyone.
- imtringued 7y agoSo they are treating companies like lottery tickets with some residual value (offsetting taxes)?
- HighlandSpring 7y agoYes - that's the business VCs are in.