6 ms·

I will never invest in a startup where the founder(s) don't believe in their companies. Moving forward all terms I negotiate will explicitly state that this (e

I will never invest in a startup where the founder(s) don't believe in their companies. Moving forward all terms I negotiate will explicitly state that this (e.g. things like FounderPool) will not be a possible scenario.

pickledish 6y ago
This seems like a needlessly hard-line stance to me. It's not reasonable to think that "belief in one's company" is the only thing that will decide the success or failure of a startup, and wanting to hedge against the scenario where you pour your heart and soul into something for years, only to see it not pay off in the end, is very understandable.
geoburke 6y ago
Are you also against founders who diversify financial risk through angel investing?
csentropy 6y ago
Thats a very nice sentiment. It is nice to hear from investors like you who have a portoilfio for diversifying your own risk, but deny that explicitly for founders, who also have no management fee as a fallback. Have you heard of founders getting money for secondary shares in series A (airbnb, FB, Clubhouse etc)? Or second time founders (who are financially secure form a prior exit) getting a premium in valuations?
tqi 6y ago
Thats like saying you'd never drive with someone who uses a seatbelt because wearing one means they don't "believe" in their ability to drive safely.
- gnicholas 6y ago
  Interestingly, pedestrian injuries went up significantly after seatbelt laws, for the reason you note/deride.
  - tqi 6y ago
    That doesn't sound right... seatbelt laws forced people who otherwise would have felt confident enough to drive without it to wear one. Low confidence drivers always had the option to wear one at any time. From only study I could find on the subject [1]: "We distinguish, following the literature, between fatalities among car occupants, who may be directly affected by using seat belts, and fatalities among nonoccupants (pedestrians, bicyclists, and motorcyclists), who do not use seat belts and can thus be affected by seat belt use only indirectly... Our findings indicate that seat belt use significantly reduces fatalities among car occupants, but does not appear to have any statistically significant effect on fatalities among non-occupants. Thus, we do not find significant evidence for compensating behavior." Maybe the invention of seat belts could have that effect, but that coincided with so many other changes to automobile technology / urban development that any observed effects are correlated at best. [1] https://web.stanford.edu/~leinav/pubs/RESTAT2003.pdf https://web.stanford.edu/~leinav/pubs/RESTAT2003.pdf
    - gnicholas 6y ago
      A more recent study seems to indicate otherwise. I have no idea which study is better designed. https://ideas.repec.org/a/eee/trapol/v44y2015icp58-64.html https://ideas.repec.org/a/eee/trapol/v44y2015icp58-64.html
  - nmfisher 6y ago
    > Interestingly, pedestrian injuries went up significantly after seatbelt laws, for the reason you note/deride. Source?
    - gnicholas 6y ago
      Not sure what book I read it in, but here’s a cite to a study that concluded this was the case: https://ideas.repec.org/a/eee/trapol/v44y2015icp58-64.html https://ideas.repec.org/a/eee/trapol/v44y2015icp58-64.html
      - nmfisher 6y ago
manojdv 6y ago
Did you follow-on on all of your investments when they got hit by coronavirus?
landryraccoon 6y ago
Doesn't that reasoning lead to saying that founders shouldn't get a salary from investors either (or only make minimum wage), since if they really believed in their idea they would be happy with equity and not money? After all, a salary means founders would be trading future risky returns for immediate low risk cash.
- Negitivefrags 6y ago
  Founders really shouldn’t get a salary, or if they do, only the minimum to live. Founders getting any more than just what they need to live incentivises people to raise money for personal gain rather than raising money to build a company. It also really blurs the line between founders and employees. How can a founder justify taking a salary at the same or even higher level than an employee while also having a huge share? We didn’t get people moaning about how employees are taking risks until SV founders stopped holding up thier end of the bargain with regard to risk taking.
  - geoburke 6y ago
    There are obviously two schools of thought here, but IMO a founder who is at least financially comfortable will make better long term decisions and take actions influenced less by personal stress.
    - bigiain 6y ago
      I think there's two important timeframes to consider here. You need to be "financially comfortable" for the 1/3/12 month foreseeable future to be able to fully focus on your startup. I'm a lot less convinced that being 10+ year financially comfortable is necessarily a desirable trait for a founder. Knowledge that their future financial freedom is 100% dependant on the success of their startup is possibly a stronger driver of "better long term decisions" than someone in a position to think "it doesn't matter too much - even if this fails I have a contingency plan"... (And I say that as someone who was once part of a team that rejected an acquisition offer that would've meant a half million payout to me, because we believed at the time we were going to be worth at least 10 times that within a year. And we were wrong. But I still stand by that decision at the time and would make it again in the same circumstances...)
yrral 6y ago
So you would never invest in a founder who does the rational thing? Believing in your own company doesn't preclude one from believing in other companies as well. Say the founder estimates their startup has an 80% chance of succeeding; they pool 5% of their equity given the non-linearity of the utility of money (the additional 5% upside is negligible in a large exit). You would immediately dismiss that founder entirely because of this choice?
bigpumpkin 6y ago
Funny how VCs can diversify risks, but founders can't. Perhaps you can concentrate your bets a bet more and believe in them harder?
imtringued 6y ago
If I truly believed in my company I wouldn't take investor money because that would imply that the investor is more important than the company.

pickledish 6y ago

This seems like a needlessly hard-line stance to me. It's not reasonable to think that "belief in one's company" is the only thing that will decide the success or failure of a startup, and wanting to hedge against the scenario where you pour your heart and soul into something for years, only to see it not pay off in the end, is very understandable.

geoburke 6y ago

Are you also against founders who diversify financial risk through angel investing?

csentropy 6y ago

Thats a very nice sentiment. It is nice to hear from investors like you who have a portoilfio for diversifying your own risk, but deny that explicitly for founders, who also have no management fee as a fallback. Have you heard of founders getting money for secondary shares in series A (airbnb, FB, Clubhouse etc)? Or second time founders (who are financially secure form a prior exit) getting a premium in valuations?

tqi 6y ago

Thats like saying you'd never drive with someone who uses a seatbelt because wearing one means they don't "believe" in their ability to drive safely.

gnicholas 6y ago
Interestingly, pedestrian injuries went up significantly after seatbelt laws, for the reason you note/deride.
- tqi 6y ago
  That doesn't sound right... seatbelt laws forced people who otherwise would have felt confident enough to drive without it to wear one. Low confidence drivers always had the option to wear one at any time. From only study I could find on the subject [1]: "We distinguish, following the literature, between fatalities among car occupants, who may be directly affected by using seat belts, and fatalities among nonoccupants (pedestrians, bicyclists, and motorcyclists), who do not use seat belts and can thus be affected by seat belt use only indirectly... Our findings indicate that seat belt use significantly reduces fatalities among car occupants, but does not appear to have any statistically significant effect on fatalities among non-occupants. Thus, we do not find significant evidence for compensating behavior." Maybe the invention of seat belts could have that effect, but that coincided with so many other changes to automobile technology / urban development that any observed effects are correlated at best. [1] https://web.stanford.edu/~leinav/pubs/RESTAT2003.pdf https://web.stanford.edu/~leinav/pubs/RESTAT2003.pdf
  - gnicholas 6y ago
    A more recent study seems to indicate otherwise. I have no idea which study is better designed. https://ideas.repec.org/a/eee/trapol/v44y2015icp58-64.html https://ideas.repec.org/a/eee/trapol/v44y2015icp58-64.html
- nmfisher 6y ago
  > Interestingly, pedestrian injuries went up significantly after seatbelt laws, for the reason you note/deride. Source?
  - gnicholas 6y ago
    Not sure what book I read it in, but here’s a cite to a study that concluded this was the case: https://ideas.repec.org/a/eee/trapol/v44y2015icp58-64.html https://ideas.repec.org/a/eee/trapol/v44y2015icp58-64.html
    - nmfisher 6y ago

manojdv 6y ago

Did you follow-on on all of your investments when they got hit by coronavirus?

landryraccoon 6y ago

Doesn't that reasoning lead to saying that founders shouldn't get a salary from investors either (or only make minimum wage), since if they really believed in their idea they would be happy with equity and not money? After all, a salary means founders would be trading future risky returns for immediate low risk cash.

Negitivefrags 6y ago
Founders really shouldn’t get a salary, or if they do, only the minimum to live. Founders getting any more than just what they need to live incentivises people to raise money for personal gain rather than raising money to build a company. It also really blurs the line between founders and employees. How can a founder justify taking a salary at the same or even higher level than an employee while also having a huge share? We didn’t get people moaning about how employees are taking risks until SV founders stopped holding up thier end of the bargain with regard to risk taking.
- geoburke 6y ago
  There are obviously two schools of thought here, but IMO a founder who is at least financially comfortable will make better long term decisions and take actions influenced less by personal stress.
  - bigiain 6y ago
    I think there's two important timeframes to consider here. You need to be "financially comfortable" for the 1/3/12 month foreseeable future to be able to fully focus on your startup. I'm a lot less convinced that being 10+ year financially comfortable is necessarily a desirable trait for a founder. Knowledge that their future financial freedom is 100% dependant on the success of their startup is possibly a stronger driver of "better long term decisions" than someone in a position to think "it doesn't matter too much - even if this fails I have a contingency plan"... (And I say that as someone who was once part of a team that rejected an acquisition offer that would've meant a half million payout to me, because we believed at the time we were going to be worth at least 10 times that within a year. And we were wrong. But I still stand by that decision at the time and would make it again in the same circumstances...)

yrral 6y ago

So you would never invest in a founder who does the rational thing? Believing in your own company doesn't preclude one from believing in other companies as well. Say the founder estimates their startup has an 80% chance of succeeding; they pool 5% of their equity given the non-linearity of the utility of money (the additional 5% upside is negligible in a large exit). You would immediately dismiss that founder entirely because of this choice?

bigpumpkin 6y ago

Funny how VCs can diversify risks, but founders can't. Perhaps you can concentrate your bets a bet more and believe in them harder?

imtringued 6y ago

If I truly believed in my company I wouldn't take investor money because that would imply that the investor is more important than the company.