4 ms·

Is there any evidence that Kagan took money off the table or paid himself an outsized salary, or hired his friends on exaggerated salaries, or used the startup'

by mceoin 5y ago

Is there any evidence that Kagan took money off the table or paid himself an outsized salary, or hired his friends on exaggerated salaries, or used the startup's funds as his piggybank? Similarly, the article conflates A16Z leading the seed round but not the follow on round as being some kind of smell. A16Z certainly do lead follow-on rounds, but it isn't the norm. (It would be interesting to know if they exercised pro-rata or not, but even that isn't necessarily indicative of anything.) I don't know if there is or isn't fraud here, but the only evidence seems to be that Kagan was good at fundraising, raise a lot in a frothy market on little traction, and did not succeed at building the product or a successful business. One of the best things about the tech ecosystem is the lack of stigma around failure. I hope people don't lose sight of that as round sizes and valuations spike.

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manquer 5y ago
Likely a16z exercised their pro-rata as a16z is also listed in their Series B on Crunchbase along with the seed. There are any number of reasons a lead investor in your seed doesn't lead your Series B, and there is no way to know a16z did not want to lead in the first place. A different fund may give a larger check/different terms/ a partner you want on board and you may accept that instead etc. There are many companies with outsized valuations that do not justify the revenue or any other metric, it is neither new to this wave (or even the dotcom wave) nor is it all that uncommon. On the surface it doesn't look like there is anything out of ordinary Kagan has done yet. It is high risk industry after all, if investors put strong filtering criteria then they risk loosing on deals which were actually legitimate or became legit with funding, it is risk VCs are quite aware of and willing to take. A Buyer should be beware of what he is getting into, accreditation is a thin shield,With Increasing SPAC listings and inflated markets even public listing won't protect them from early stage startup shenanigans these days companies like Nikola (anyone can invest ) do exist.
qnsi 5y ago
there is small proof of fraud though. I am now writing from memory but they claim they have many clients when their own search shows they have only few small clients.
gumby 5y ago
> Similarly, the article conflates A16Z leading the seed round but not the follow on round as being some kind of smell. Typically everybody wants a new investor to lead the next round. A completely inside round is usually a sign that a company is in trouble (though it could mean the deal is so sweet the insiders don’t want to share). As in investor, a newcomer is reassuring that you aren’t simply in love with the business. And for management, investors, and of board, someone new setting a price guarantees that the new price wasn’t determined on some sweetheart basis.
- enra 5y ago
  Typically multi-stage investors like A16Z would like to lead the follow up round from seed. Seed is just a way to get in to the company, and the next rounds are where the actual money is for large funds. If the company is killing it, there is no reason for the VC not to invest. You basically want every single piece of the cap table you can without messing up the company. This is where the whole "signaling risk" issue came from. If you look up Crunchbase where A16Z are the lead investor and organize the list by company name, you see that it's more likely they have lead at least 2 rounds: Charthop (seed, A, B), Compound (seed, A), Clubhouse (A,B,C), Databricks (A,D,E,F), Descript (seed, A), Fivetran (B,C,D)... Founders can also prefer the previous investor because often you can get lower dilution, you already know the investors, no additional board seats and get the round done in one day vs multi week or month raise. Founders sometimes can also prefer choosing a new lead investor but I wouldn't say it's typical at all that everyone wants a new investor. Another multi-stage investors, Sequoia, WhatsApp raised all their rounds from Sequoia and no-one else. Sequoia also led Stripe's seed, Series A and have participated in every round so far. In the end it's the founder who chooses the lead investor.

by mceoin 5y ago

deleted 5y ago

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manquer 5y ago

Likely a16z exercised their pro-rata as a16z is also listed in their Series B on Crunchbase along with the seed. There are any number of reasons a lead investor in your seed doesn't lead your Series B, and there is no way to know a16z did not want to lead in the first place. A different fund may give a larger check/different terms/ a partner you want on board and you may accept that instead etc. There are many companies with outsized valuations that do not justify the revenue or any other metric, it is neither new to this wave (or even the dotcom wave) nor is it all that uncommon. On the surface it doesn't look like there is anything out of ordinary Kagan has done yet. It is high risk industry after all, if investors put strong filtering criteria then they risk loosing on deals which were actually legitimate or became legit with funding, it is risk VCs are quite aware of and willing to take. A Buyer should be beware of what he is getting into, accreditation is a thin shield,With Increasing SPAC listings and inflated markets even public listing won't protect them from early stage startup shenanigans these days companies like Nikola (anyone can invest ) do exist.

qnsi 5y ago

there is small proof of fraud though. I am now writing from memory but they claim they have many clients when their own search shows they have only few small clients.

gumby 5y ago

> Similarly, the article conflates A16Z leading the seed round but not the follow on round as being some kind of smell. Typically everybody wants a new investor to lead the next round. A completely inside round is usually a sign that a company is in trouble (though it could mean the deal is so sweet the insiders don’t want to share). As in investor, a newcomer is reassuring that you aren’t simply in love with the business. And for management, investors, and of board, someone new setting a price guarantees that the new price wasn’t determined on some sweetheart basis.

enra 5y ago
Typically multi-stage investors like A16Z would like to lead the follow up round from seed. Seed is just a way to get in to the company, and the next rounds are where the actual money is for large funds. If the company is killing it, there is no reason for the VC not to invest. You basically want every single piece of the cap table you can without messing up the company. This is where the whole "signaling risk" issue came from. If you look up Crunchbase where A16Z are the lead investor and organize the list by company name, you see that it's more likely they have lead at least 2 rounds: Charthop (seed, A, B), Compound (seed, A), Clubhouse (A,B,C), Databricks (A,D,E,F), Descript (seed, A), Fivetran (B,C,D)... Founders can also prefer the previous investor because often you can get lower dilution, you already know the investors, no additional board seats and get the round done in one day vs multi week or month raise. Founders sometimes can also prefer choosing a new lead investor but I wouldn't say it's typical at all that everyone wants a new investor. Another multi-stage investors, Sequoia, WhatsApp raised all their rounds from Sequoia and no-one else. Sequoia also led Stripe's seed, Series A and have participated in every round so far. In the end it's the founder who chooses the lead investor.