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But then you are VC-funded. As Barrin92 hinted at, VCs tend to want to see returns and consequentially optimize for growth. Or is the idea for VC to pull out an
by anyfoo 4y ago
But then you are VC-funded. As Barrin92 hinted at, VCs tend to want to see returns and consequentially optimize for growth. Or is the idea for VC to pull out and realize profits once the company got to Mittelstand?
- thanedar 4y agoI mentioned this in another comment - pre-Mittelstand investing is also driven by power-law 100x+ returns. If you invest $100K at <$1M valuation pre-revenue in 100 pre-Mittelstands, 1-5% of those companies are going to get to $100M+, 10-30% will get to $10M+, and 50%+ will get a positive exit. There is a robust buyout market between PEs and corporates for these companies. Yes, this is a form of venture capital. But most VCs today would not consider pre-Mittelstands VC-backable startups. This post and my last one We Need a Middle Class for Startups (https://neilthanedar.com/we-need-a-middle-class-for-startups/ https://neilthanedar.com/we-need-a-middle-class-for-startups...) make the argument to VCs that they can get big exits and returns investing in Mittelstands.
- atlasunshrugged 4y agoIsn't that why more traditional investors like banks give business loans or PE firms exist?
- thanedar 4y agoBanks are a great option $1-10M+ revenue. PE works $10M+ revenue. I'd target this Y Combinator for Mittelstands accelerator at the $0 to $1M stage for pre-Mittelstands.
- anyfoo 4y agoIt's very well possible that I either did not understand how your answer relates to my question, or that my definition of "exit" (namely, that a company gets sold, usually to a larger entity, and is not held by founders anymore) is incorrect or too narrow, but, again, how is an exit compatible with a company being part of the Mittelstand? You say "pre-Mittelstand", so I guess it's not about investing in companies that are aready Mittelstand (and effectively lifting them out of that) either.
- thanedar 4y agoMy idea here is to get more founders from zero to Mittelstand faster. From there, they will have many exit options, including corporates, PE, and even IPO. I don't believe there's anything in the Mittelstand definition that prohibits exits.
- Meai 4y agoBut by definition if a company grows for decades it doesn't 'exit' (=it isn't sold or renamed or repurposed). So I think that the Mittelstand definition should prohibit an exit, maybe not for the individual (=founder/owner) but for the company as a whole. In my opinion this is why in german you don't really use the term for companies anyway except when econonomists look back and analyze your company history.