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the founders thought things were going to get worse, not better This is speculation about the future. The market has tested its value, and the value must have

the founders thought things were going to get worse, not better This is speculation about the future. The market has tested its value, and the value must have been found to be poor, otherwise exit decisions would be based upon it. In other words, what the market tends to weed out is micro-management. If a consistent strategy of blocking 3x exits -- -- rather than an inconsistent micro-management strategy involving speculating on the value of speculation -- works, then it works. The critical question remains: Why are there no successful VC's that follow your and Matt's "founders can reliably predict the future" strategy?

pmjordan 18y ago
Why are there no successful VC's that follow your and Matt's "founders can reliably predict the future" strategy? Because you're assuming that I'm saying that all 3x valuation situations are the same. Obviously the founders (especially first-timers) will usually be much keener to exit at 3x than risk crashing and burning, because there's more on the line for them personally than for the VCs. And it's understandable that VCs (need to) protect against that, as it probably happens a lot. However, the author (an investor himself) deemed this case sufficiently noteworthy to write about it. The impression I got wasn't that this was as clear cut a case as the usual "hold out until 10x valuation". But I suppose it comes down to the fact that we know very little about this specific case.
- gravitycop 18y ago
  However, the author (an investor himself) deemed this case sufficiently noteworthy to write about it. No he didn't. He explicitly said that there was nothing noteworthy about the case. My friend couldn’t understand why his board was blocking the sale. He asked me why the VCs on his board couldn’t see the situation they were in and appreciate the opportunity for a great exit that was right in front of them. I explained that it wasn’t the VCs who were missing something; it was my founder friend who didn’t get it. This is not an isolated event. It happens all the time.
mattmaroon 18y ago
I never said founders can reliably predict the future. I never even said they could do so better than VCs. I simply said the author was missing the point. It wasn't that the VC just won't accept anything less than 10x. They do it all the time. It was that in this particular case, he probably felt that by not exiting he would, on average, get more than 3x. I have no opinion whether or not that's true. But I know for a fact that VCs (at least ones with a clue) don't just categorically reject every exit below 10x.

pmjordan 18y ago

Why are there no successful VC's that follow your and Matt's "founders can reliably predict the future" strategy? Because you're assuming that I'm saying that all 3x valuation situations are the same. Obviously the founders (especially first-timers) will usually be much keener to exit at 3x than risk crashing and burning, because there's more on the line for them personally than for the VCs. And it's understandable that VCs (need to) protect against that, as it probably happens a lot. However, the author (an investor himself) deemed this case sufficiently noteworthy to write about it. The impression I got wasn't that this was as clear cut a case as the usual "hold out until 10x valuation". But I suppose it comes down to the fact that we know very little about this specific case.

gravitycop 18y ago
However, the author (an investor himself) deemed this case sufficiently noteworthy to write about it. No he didn't. He explicitly said that there was nothing noteworthy about the case. My friend couldn’t understand why his board was blocking the sale. He asked me why the VCs on his board couldn’t see the situation they were in and appreciate the opportunity for a great exit that was right in front of them. I explained that it wasn’t the VCs who were missing something; it was my founder friend who didn’t get it. This is not an isolated event. It happens all the time.

mattmaroon 18y ago

I never said founders can reliably predict the future. I never even said they could do so better than VCs. I simply said the author was missing the point. It wasn't that the VC just won't accept anything less than 10x. They do it all the time. It was that in this particular case, he probably felt that by not exiting he would, on average, get more than 3x. I have no opinion whether or not that's true. But I know for a fact that VCs (at least ones with a clue) don't just categorically reject every exit below 10x.