6 ms·

>>Follow the fucking money. When a VC tells you what's good for you, check your wallet, then count your fingers.<< This is just gold.

deleted 15y ago
[deleted]
mjijackson 15y ago
Been thinking a lot about this statement, but still not sure exactly what he means by it. I could interpret it a few different ways, and I'm probably over-thinking it. How do you interpret this?
- guelo 15y ago
  It just means that the VC doesn't have your best interest in mind, they only care about making money.
- duncanj 15y ago
  You may think you're shaking hands with someone but he's actually picking your pocket. "Count your fingers after shaking hands with that guy" is an idiom suggesting that the guy will steal one.
- interlagos 15y ago
  It means that people pushing advice usually do so primarily for their own good. This is a universal truth that applies to many situations.
corin_ 15y ago
It struck me more as simple than gold. If a VC that invested in a company gives them advice then obviously his goal is to make more money... but that goal will, in turn make you more money too. If you don't like the fact that a VC has the potential to make more money than you, the solution is to not take investment from one, not to ignore them after they take investment. Also remember that yes, they're not putting in a lot of work to make the money - but you aren't putting in a lot of money that you might lose, which they did. I'm not arguing for or against working crazy hours, just against the idea that you should be scared of any suggestion from a VC.
- patio11 15y ago
  you aren't putting in a lot of money that you might lose, which they did. VCs make money win or lose. Limited partners actually have capital risk. People know this, right?
  - corin_ 15y ago
    Afraid not (afraid I don't know, not you're wrong) - how does a VC make money if a company they invested in goes bust and shuts down?
    - martinkallstrom 15y ago
      They make money on 1 out of 10 companies they invest in. If a company they invested in goes bust they make the money somewhere else. EDIT: Sorry for this lame answer, I wasn't reading the question right. The real answer is that the people working with VC are managing someone else's money (the limited partners' money). They themselves get a salary which is a percentage of the amount of money the manage, only sometimes with a bonus correlating to how well they are doing their job.
    - sector 15y ago
      VCs are (primarily) investing other people's money. The basic overview is this: VC raises a $100m fund that is expected to last for 10 years. They charge a 2%/yr management fee, for their work as investors. Then, they also keep 20% of the gains from their investments. So if the fund operates for 10 years and exits for $400m, my understanding is that they'd take $20m for managing the fund, plus $60m "carried interest", and return the rest to the limited parters (the investors whose money was actually at risk). If the fund operates for 10 years and the companies sell for a combined total of $50m, they still charge the $20m management fee, and the investors have $30m returned to them. Thus, VCs themselves have very limited downside.
      - anothermachine 15y ago
        That seems insane. Why would a wealthy (and presumably intelligent) investor hand over 20% of gains to someone with no skin in the game? I guess if the VC had a track record from which to estimate expected returns, it could be a big deal, but no one has a track record, because these business cycles are so short. If were a multi-millionaire, why wouldn't I say "Hey Mr. VC, if you think you can turn $100M into $400M, why don't you borrow it from me and pay 10% interest?"

deleted 15y ago

[deleted]

mjijackson 15y ago

Been thinking a lot about this statement, but still not sure exactly what he means by it. I could interpret it a few different ways, and I'm probably over-thinking it. How do you interpret this?

guelo 15y ago
It just means that the VC doesn't have your best interest in mind, they only care about making money.
duncanj 15y ago
You may think you're shaking hands with someone but he's actually picking your pocket. "Count your fingers after shaking hands with that guy" is an idiom suggesting that the guy will steal one.
interlagos 15y ago
It means that people pushing advice usually do so primarily for their own good. This is a universal truth that applies to many situations.

corin_ 15y ago

It struck me more as simple than gold. If a VC that invested in a company gives them advice then obviously his goal is to make more money... but that goal will, in turn make you more money too. If you don't like the fact that a VC has the potential to make more money than you, the solution is to not take investment from one, not to ignore them after they take investment. Also remember that yes, they're not putting in a lot of work to make the money - but you aren't putting in a lot of money that you might lose, which they did. I'm not arguing for or against working crazy hours, just against the idea that you should be scared of any suggestion from a VC.

patio11 15y ago
you aren't putting in a lot of money that you might lose, which they did. VCs make money win or lose. Limited partners actually have capital risk. People know this, right?
- corin_ 15y ago
  Afraid not (afraid I don't know, not you're wrong) - how does a VC make money if a company they invested in goes bust and shuts down?
  - martinkallstrom 15y ago
    They make money on 1 out of 10 companies they invest in. If a company they invested in goes bust they make the money somewhere else. EDIT: Sorry for this lame answer, I wasn't reading the question right. The real answer is that the people working with VC are managing someone else's money (the limited partners' money). They themselves get a salary which is a percentage of the amount of money the manage, only sometimes with a bonus correlating to how well they are doing their job.
  - sector 15y ago
    VCs are (primarily) investing other people's money. The basic overview is this: VC raises a $100m fund that is expected to last for 10 years. They charge a 2%/yr management fee, for their work as investors. Then, they also keep 20% of the gains from their investments. So if the fund operates for 10 years and exits for $400m, my understanding is that they'd take $20m for managing the fund, plus $60m "carried interest", and return the rest to the limited parters (the investors whose money was actually at risk). If the fund operates for 10 years and the companies sell for a combined total of $50m, they still charge the $20m management fee, and the investors have $30m returned to them. Thus, VCs themselves have very limited downside.
    - anothermachine 15y ago
      That seems insane. Why would a wealthy (and presumably intelligent) investor hand over 20% of gains to someone with no skin in the game? I guess if the VC had a track record from which to estimate expected returns, it could be a big deal, but no one has a track record, because these business cycles are so short. If were a multi-millionaire, why wouldn't I say "Hey Mr. VC, if you think you can turn $100M into $400M, why don't you borrow it from me and pay 10% interest?"