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Is it possible to take the money and just not do any of that? Just increase your runway? I’d guess it’s socially impossible even if it’d be legally allowed.

Is it possible to take the money and just not do any of that? Just increase your runway? I’d guess it’s socially impossible even if it’d be legally allowed. PG alludes to this idea with the treasury comment, but I really wonder about it. Maybe your investors would hate you, but it’d be a pretty comfortable move.

ido 5y ago
I don't know the answer but I think investors at the very least expect you to invest the money they give you, not just keep it for a rainy day. I don't know how much leverage they will have to make you spend it.
- usrusr 5y ago
  I'm another poster completely devoid of actual knowledge (old Paul Graham posts are the fanfic corner of hn, right?) I'd expect that to be part of the standard threat models that a fund would have prefab contract modules for. Founders still have 50+1? (otherwise it's clear what would happen) Include module "contingency stake transfer agreement" or something like that. But it won't come to that, I'd expect GP's "socially impossible" to work well enough. Particularly when there actually is something in the contracts, that something will never be tested.
yashap 5y ago
I’ve never been a founder or a VC, so I don’t really know, but happy to speculate :) I’d imagine it depends on the company, and “how are you going to spend the money” is something you’d discuss with VCs before the investment goes through. I think the strong majority of the time, VCs want you to pump the money into the business to drive immediate hyper growth. They want to identify businesses that can soak up VC money and make good use of it … like Google, FB, etc. Most companies can’t, the money drives just moderate growth and a lot of inefficiency, but they want to do this test to see if they’ve struck gold. If you agree to do this, then don’t, new CEO time. But I think there’s some companies that are clearly big, long term product bets. Where they know the runway has to be long, and years of product development has to happen before major growth. For example, I’m guessing if you’re a series A investor in something like CockroachDB, Tesla, SpaceX, you’re a bit more “yeah, take your time, spend this over 5+ years.” But that’s an anomaly, not the norm.
eloff 5y ago
The VCs control your board. If you don't spend the money the way they want, they can and will replace you. They might even find a creative way to dilute your stock to $0. Lots of stories like that. Taking VC is like making a deal with the devil.

ido 5y ago

I don't know the answer but I think investors at the very least expect you to invest the money they give you, not just keep it for a rainy day. I don't know how much leverage they will have to make you spend it.

usrusr 5y ago
I'm another poster completely devoid of actual knowledge (old Paul Graham posts are the fanfic corner of hn, right?) I'd expect that to be part of the standard threat models that a fund would have prefab contract modules for. Founders still have 50+1? (otherwise it's clear what would happen) Include module "contingency stake transfer agreement" or something like that. But it won't come to that, I'd expect GP's "socially impossible" to work well enough. Particularly when there actually is something in the contracts, that something will never be tested.

yashap 5y ago

I’ve never been a founder or a VC, so I don’t really know, but happy to speculate :) I’d imagine it depends on the company, and “how are you going to spend the money” is something you’d discuss with VCs before the investment goes through. I think the strong majority of the time, VCs want you to pump the money into the business to drive immediate hyper growth. They want to identify businesses that can soak up VC money and make good use of it … like Google, FB, etc. Most companies can’t, the money drives just moderate growth and a lot of inefficiency, but they want to do this test to see if they’ve struck gold. If you agree to do this, then don’t, new CEO time. But I think there’s some companies that are clearly big, long term product bets. Where they know the runway has to be long, and years of product development has to happen before major growth. For example, I’m guessing if you’re a series A investor in something like CockroachDB, Tesla, SpaceX, you’re a bit more “yeah, take your time, spend this over 5+ years.” But that’s an anomaly, not the norm.

eloff 5y ago

The VCs control your board. If you don't spend the money the way they want, they can and will replace you. They might even find a creative way to dilute your stock to $0. Lots of stories like that. Taking VC is like making a deal with the devil.