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Phil Libin explains why Evernote took money

15 points by vibrunazo 14y ago

vibrunazo 14y ago
I haven't heard of that story about decoupling exits from liquidity before. At where I live, the mantra is that if you take money, you must have been looking to an exit. If someone put money on you, they must be eyeing for a quick exit - there's no way around it. In fact, I've heard many "mentors" and investors explicitly tell me exactly that. Is this separation that Phil talks about a common knowledge in the Valley? Or anywhere else?
- DanielRibeiro 14y ago
  This was actually forshadowed by pg in 2005[1]: The most dramatic change, I predict, is that VCs will allow founders to cash out partially by selling some of their stock direct to the VC firm. VCs have traditionally resisted letting founders get anything before the ultimate "liquidity event." [1] http://paulgraham.com/startupfunding.html http://paulgraham.com/startupfunding.html
- raja 14y ago
  Founders selling a small percentage of their stock as part of a (usually late) financing round is pretty common. It's in the investors interest to see that the founders are focused on growth and not lured by an exit at an unattractive multiple. Letting founders take cash off the table by selling a small percentage of their stock as part of a late financing round keeps the founder focused on growth instead of creating liquidity for themselves. Secondly, capital gains tax on a stock sale is much lower than income tax that would be garnered by paying yourself a bigger salary. A VC who has participated in an early round also often sells some stock in a late round to hedge their risk.
malandrew 14y ago
I think that it's not just a matter of separating exits from liquidity, but that it is reasonable for anyone with any serious net worth to diversify their assets. If you are worth $20 million because of the equity in your company and 100% of that $20 is tied to that company, it is completely reasonable to diversity some of that $20 million. However, I would say that you need to be prudent about signaling. Diversifying all the risk away from your own business isn't a good sign, but diversifying up to 50% is reasonable. I will add that it's quite ridiculous for investors to be highly diversified and than judge entrepreneurs for wanting to diversify some of their assets when all their net worth is tied up in their startup.

15 points by vibrunazo 14y ago

I haven't heard of that story about decoupling exits from liquidity before. At where I live, the mantra is that if you take money, you must have been looking to an exit. If someone put money on you, they must be eyeing for a quick exit - there's no way around it. In fact, I've heard many "mentors" and investors explicitly tell me exactly that. Is this separation that Phil talks about a common knowledge in the Valley? Or anywhere else?

DanielRibeiro 14y ago
This was actually forshadowed by pg in 2005[1]: The most dramatic change, I predict, is that VCs will allow founders to cash out partially by selling some of their stock direct to the VC firm. VCs have traditionally resisted letting founders get anything before the ultimate "liquidity event." [1] http://paulgraham.com/startupfunding.html http://paulgraham.com/startupfunding.html
raja 14y ago
Founders selling a small percentage of their stock as part of a (usually late) financing round is pretty common. It's in the investors interest to see that the founders are focused on growth and not lured by an exit at an unattractive multiple. Letting founders take cash off the table by selling a small percentage of their stock as part of a late financing round keeps the founder focused on growth instead of creating liquidity for themselves. Secondly, capital gains tax on a stock sale is much lower than income tax that would be garnered by paying yourself a bigger salary. A VC who has participated in an early round also often sells some stock in a late round to hedge their risk.

malandrew 14y ago

I think that it's not just a matter of separating exits from liquidity, but that it is reasonable for anyone with any serious net worth to diversify their assets. If you are worth $20 million because of the equity in your company and 100% of that $20 is tied to that company, it is completely reasonable to diversity some of that $20 million. However, I would say that you need to be prudent about signaling. Diversifying all the risk away from your own business isn't a good sign, but diversifying up to 50% is reasonable. I will add that it's quite ridiculous for investors to be highly diversified and than judge entrepreneurs for wanting to diversify some of their assets when all their net worth is tied up in their startup.