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> or even 10 million > the founders will be rich A common misconception that is usually untrue. If you hop on the VC train there are many reasons why founders

> or even 10 million > the founders will be rich A common misconception that is usually untrue. If you hop on the VC train there are many reasons why founders can get $0. VC gets preferential shares which means that founders (common shares) often get nothing even though the business sold for millions.

computerdork 3y ago
Ah, I see. And actually, I do know a little about startups (even though I said I'm no expert), and thought that most founders who sell their businesses for something like 10 million can make a comfortable amount of cash. But didn't realize that if they use VC's, the VC's can take so much! So, was wondering, would you happen to know if there is a standard amount in a sale of a startup funded by a VC that makes the founders a good amount of money? (Talking about the minimum needed to make a million for a couple of founders).
- bruce511 3y ago
  I guess the break-even line is exiting for more than you raised. If you raise 20 mil, and sold for 20 that's different to raising 5 and selling for 10. Thing is though, the latter scenario isn't common. If you raised 5, and are offered 10, you probably won't accept. You'll go raise another round. Until you can't raise anymore, at which point the exit is likely underwater. But you got paid a salary along the way, so thats not to be ignored.
  - robocat 3y ago
    Often founders don't get to choose when to sell. e.g.: Investors usually get vetos over certain big decisions, like selling the company, regardless of how many board seats they have. And investors can force-feed money that founders don't want for a variety of reasons. Read articles by: https://siliconhillslawyer.com https://siliconhillslawyer.com
    - computerdork 3y ago
      Ah, can see that investors can force the company to shoot for the moon, instead of just trying to right-size the business and sell it. Very interesting!
      - robocat 3y ago
        Yeah: VC incentives do not match with founders incentives - share classes are just one obvious signal of that. Good article on that conflict: https://siliconhillslawyer.com/2019/02/18/relationships-and-power-startup-ecosystems/ https://siliconhillslawyer.com/2019/02/18/relationships-and-... > ~9% where valuable enough for investors to take profit Or aquihired. Best analysis I have seen of YC: https://jaredheyman.medium.com/on-the-life-and-death-of-y-combinator-startups-d58aa03421f0 https://jaredheyman.medium.com/on-the-life-and-death-of-y-co... Disappointingly YC hasn't provided any good analysis for founders or employees. YC doesn't try to align founders and investors incentives - Paul mostly reads like a Venture Capitalist to me (sell founders of their good intentions but don't actually structure incentives to align). I actually think that YC is a great deal but startups are naturally a frog and scorpion system. It is hard to find better options. Finding good information is difficult and YC don't help.
  - computerdork 3y ago
    Good to know, thanks for the info!

computerdork 3y ago

Ah, I see. And actually, I do know a little about startups (even though I said I'm no expert), and thought that most founders who sell their businesses for something like 10 million can make a comfortable amount of cash. But didn't realize that if they use VC's, the VC's can take so much! So, was wondering, would you happen to know if there is a standard amount in a sale of a startup funded by a VC that makes the founders a good amount of money? (Talking about the minimum needed to make a million for a couple of founders).

bruce511 3y ago
I guess the break-even line is exiting for more than you raised. If you raise 20 mil, and sold for 20 that's different to raising 5 and selling for 10. Thing is though, the latter scenario isn't common. If you raised 5, and are offered 10, you probably won't accept. You'll go raise another round. Until you can't raise anymore, at which point the exit is likely underwater. But you got paid a salary along the way, so thats not to be ignored.
- robocat 3y ago
  Often founders don't get to choose when to sell. e.g.: Investors usually get vetos over certain big decisions, like selling the company, regardless of how many board seats they have. And investors can force-feed money that founders don't want for a variety of reasons. Read articles by: https://siliconhillslawyer.com https://siliconhillslawyer.com
  - computerdork 3y ago
    Ah, can see that investors can force the company to shoot for the moon, instead of just trying to right-size the business and sell it. Very interesting!
    - robocat 3y ago
      Yeah: VC incentives do not match with founders incentives - share classes are just one obvious signal of that. Good article on that conflict: https://siliconhillslawyer.com/2019/02/18/relationships-and-power-startup-ecosystems/ https://siliconhillslawyer.com/2019/02/18/relationships-and-... > ~9% where valuable enough for investors to take profit Or aquihired. Best analysis I have seen of YC: https://jaredheyman.medium.com/on-the-life-and-death-of-y-combinator-startups-d58aa03421f0 https://jaredheyman.medium.com/on-the-life-and-death-of-y-co... Disappointingly YC hasn't provided any good analysis for founders or employees. YC doesn't try to align founders and investors incentives - Paul mostly reads like a Venture Capitalist to me (sell founders of their good intentions but don't actually structure incentives to align). I actually think that YC is a great deal but startups are naturally a frog and scorpion system. It is hard to find better options. Finding good information is difficult and YC don't help.
- computerdork 3y ago
  Good to know, thanks for the info!