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How is it screwing over founders? They put in $ for 20%, you put in sweat for 80%. Why again is them not getting 20% the right solution? Unless the agreements

How is it screwing over founders? They put in $ for 20%, you put in sweat for 80%. Why again is them not getting 20% the right solution? Unless the agreements said “hey look, sub 5x were okay with you getting it all”. The business didn’t work. Arguably since only management is involved with running the business, it’s managements fault it didn’t work...why do the investors get 0 and the management team get bailed out? It’s not like they took zero salaries / weren’t compensated... The world doesn’t work if you sign stuff and then later decide to not honor it just because you can torpedo the guy or girl on the other side of the table. The ceo also doesn’t seem to have paid the staff either, based on his self disclosure. Not sure exactly how jamming a VC and not giving them at least what they put in back isn’t honorable.

ZephyrBlu 6y ago
Because it's scraping the bottom of the barrel. There's not really a sensible reason for the investors to try and claw back their investment every time a company fails, because the business model is based on homeruns.
relaunched 6y ago
The issue is that their fund business model looks at a 20% roi over 5 years as a loss. If they do that 50% of the time, they don't raise another fund. There is nothing wrong with getting what you are entitled to. But, it's worth praising when someone forgoes what they are entitled to, when the situation really isn't a win - win. The VC took an immaterial loss, by choosing for give up an immaterial gain, so that something material can happen for the founder and their team.
- treis 6y ago
  >The VC took an immaterial loss, by choosing for give up an immaterial gain, so that something material can happen for the founder and their team. But that's not what happened. The business was sold for $4 million. The only difference the VCs actions made was that the founder walked away with 3.7 million instead of 2.9.
  - relaunched 6y ago
    There were two things worth pointing out - the acquisition price was lower b/c the founder wanted to walk away and >>>As part of the structure of the deal, Xenon guaranteed I’d take home $3.7m, regardless of what came up during due diligence. This was important because many times, after months of due diligence, things invariably come up that reduce the purchase price: working capital requirements, unpaid PTO, unrecognized revenue, and a thousand other things. And I wasn’t interested in dealing with that. I wanted stability and I wanted that $3.7m outcome to hit our family’s financial goals. Given those terms, I believe the author when he says that this was the best offer he could get that met his terms. If that is true, had the investors insisted on their cut, he founder wouldn't have hit his family financial goal, and would not have sold.
  - dsfdsfkl 6y ago
    Why are you so bitter dude, the guy worked his ass off and got his exit. Celebrate it and look to see how you can replicate it instead of coming off as jealous. What a VC does with their money is their choice, a 800k return isn't worth their time and energy if they can spend that time and energy on a billion dollar company within their portfolio.

ZephyrBlu 6y ago

Because it's scraping the bottom of the barrel. There's not really a sensible reason for the investors to try and claw back their investment every time a company fails, because the business model is based on homeruns.

relaunched 6y ago

The issue is that their fund business model looks at a 20% roi over 5 years as a loss. If they do that 50% of the time, they don't raise another fund. There is nothing wrong with getting what you are entitled to. But, it's worth praising when someone forgoes what they are entitled to, when the situation really isn't a win - win. The VC took an immaterial loss, by choosing for give up an immaterial gain, so that something material can happen for the founder and their team.

treis 6y ago
>The VC took an immaterial loss, by choosing for give up an immaterial gain, so that something material can happen for the founder and their team. But that's not what happened. The business was sold for $4 million. The only difference the VCs actions made was that the founder walked away with 3.7 million instead of 2.9.
- relaunched 6y ago
  There were two things worth pointing out - the acquisition price was lower b/c the founder wanted to walk away and >>>As part of the structure of the deal, Xenon guaranteed I’d take home $3.7m, regardless of what came up during due diligence. This was important because many times, after months of due diligence, things invariably come up that reduce the purchase price: working capital requirements, unpaid PTO, unrecognized revenue, and a thousand other things. And I wasn’t interested in dealing with that. I wanted stability and I wanted that $3.7m outcome to hit our family’s financial goals. Given those terms, I believe the author when he says that this was the best offer he could get that met his terms. If that is true, had the investors insisted on their cut, he founder wouldn't have hit his family financial goal, and would not have sold.
- dsfdsfkl 6y ago
  Why are you so bitter dude, the guy worked his ass off and got his exit. Celebrate it and look to see how you can replicate it instead of coming off as jealous. What a VC does with their money is their choice, a 800k return isn't worth their time and energy if they can spend that time and energy on a billion dollar company within their portfolio.