4 ms·

...Now 33, McFarland has a 3-year-old and a newborn and no longer has to think about his student loan: His company has US$17.75-million in venture capital inves

by nlh 13y ago

...Now 33, McFarland has a 3-year-old and a newborn and no longer has to think about his student loan: His company has US$17.75-million in venture capital investment. While he doesn’t consider himself retire-now rich, his piece of the company affords him what he calls “breathing room” and what other people might call wealth... ...Scribd took off and now has millions of dollars in funding... I know this has become a meme, but it's being done here much more blatantly than I've seen in other articles. It doesn't have to be said (but I'll still say it): Venture Capital funding does not by itself mean that either A) the founders are millionaires or B) that the company is successful. It's a vote of confidence. It's a chance to be successful. And it's exciting and can be a great step along the path of success. But the notion that "raising VC is the goalpost of startup success" is a notion that probably does more harm than good.

lsc 13y ago
>It doesn't have to be said (but I'll still say it): Venture Capital funding does not by itself mean that either A) the founders are millionaires or B) that the company is successful. How does that work, then? I mean, if I'm managing tens of millions of dollars in someone else's money, I'm going to want some compensation for that. You can afford it. Hell, personal financial advisers generally take 1%, right? that'd be north of $177K right there. And surely a startup founder does more work than a personal financial adviser. I mean, I don't have insight into what founders of funded companies get paid... but I find the idea that they are worrying about student loans, well, to be pretty unlikely.
- deleted 13y ago
  [deleted]
- freyr 13y ago
  > How does that work, then? I mean, if I'm managing tens of millions of dollars in someone else's money, I'm going to want some compensation for that. When somebody invests in your fledgling company, it's typically not a congratulations for getting out of the starting gate. It's money that allows you to grow your business. You could have payroll, marketing, servers, office space, legal fees, etc. and depending on the business, you can burn through millions extremely quickly. Not to say you can't pay yourself a decent salary, but you're probably not living high on the hog. If you're stashing the money in your personal bank account (and I'm sure some have), that's likely to make people very unhappy. And, yes, a startup founder might work more than a personal financial advisor. But he also stands to gain much more for his work, if all goes well, down the line.
  - greghinch 13y ago
    $17.75 million invested is probably beyond the stage of "fledgling". Perhaps "middling"? I will agree that founders' large salaries should come from profit, not investment. Also, you have to imagine that the valuation of the company is somewhere in the neighborhood of 3-4x the amount invested, if not more depending on how recently the last round was. And as a founder it seems reasonable to assume around 10-15% equity remaining after a couple rounds, also assuming a couple other founders with similar stakes. That pegs his shares' value anywhere from $5-10 million. It may just be on paper, but you still count it in "net worth", a term readers of the Financial Post are probably most interested in. And definitely warrants, if the product is successful in its own right to any degree, feeling a bit of "breathing room".
- ddeck 13y ago
  >Hell, personal financial advisers generally take 1%, right? that'd be north of $177K right there. And surely a startup founder does more work than a personal financial adviser. An underground coal miner works "harder" than a financial adviser too, but I doubt they're earning more. Comparisons aside, the investment is for the company, not the founder. The founder may have a decent salary, but income is not wealth and that income stops if the business fails.
  - lsc 13y ago
    >but income is not wealth and that income stops if the business fails. Sure, sure, I'm just saying, that "decent salary" ought to make the student loans a non-problem. At a minimum, if I'm investing that much in a company, I want to pay the founders enough that they focus on the company, not on personal finances. More to the point, well, if you are a good enough negotiator to talk investors in to letting you control that much money, well, you are probably a good enough negotiator to negotiate a little something-something for yourself. I mean, I'm not saying millions a year, but certainly enough that things like student loans go away.
31reasons 13y ago
Its like saying, A horse is a winner if there are more bets on it in the race.
beachstartup 13y ago
yeah but it sure does generate clicks from people who don't know how the system works though.

by nlh 13y ago

lsc 13y ago

>It doesn't have to be said (but I'll still say it): Venture Capital funding does not by itself mean that either A) the founders are millionaires or B) that the company is successful. How does that work, then? I mean, if I'm managing tens of millions of dollars in someone else's money, I'm going to want some compensation for that. You can afford it. Hell, personal financial advisers generally take 1%, right? that'd be north of $177K right there. And surely a startup founder does more work than a personal financial adviser. I mean, I don't have insight into what founders of funded companies get paid... but I find the idea that they are worrying about student loans, well, to be pretty unlikely.

deleted 13y ago
[deleted]
freyr 13y ago
> How does that work, then? I mean, if I'm managing tens of millions of dollars in someone else's money, I'm going to want some compensation for that. When somebody invests in your fledgling company, it's typically not a congratulations for getting out of the starting gate. It's money that allows you to grow your business. You could have payroll, marketing, servers, office space, legal fees, etc. and depending on the business, you can burn through millions extremely quickly. Not to say you can't pay yourself a decent salary, but you're probably not living high on the hog. If you're stashing the money in your personal bank account (and I'm sure some have), that's likely to make people very unhappy. And, yes, a startup founder might work more than a personal financial advisor. But he also stands to gain much more for his work, if all goes well, down the line.
- greghinch 13y ago
  $17.75 million invested is probably beyond the stage of "fledgling". Perhaps "middling"? I will agree that founders' large salaries should come from profit, not investment. Also, you have to imagine that the valuation of the company is somewhere in the neighborhood of 3-4x the amount invested, if not more depending on how recently the last round was. And as a founder it seems reasonable to assume around 10-15% equity remaining after a couple rounds, also assuming a couple other founders with similar stakes. That pegs his shares' value anywhere from $5-10 million. It may just be on paper, but you still count it in "net worth", a term readers of the Financial Post are probably most interested in. And definitely warrants, if the product is successful in its own right to any degree, feeling a bit of "breathing room".
ddeck 13y ago
>Hell, personal financial advisers generally take 1%, right? that'd be north of $177K right there. And surely a startup founder does more work than a personal financial adviser. An underground coal miner works "harder" than a financial adviser too, but I doubt they're earning more. Comparisons aside, the investment is for the company, not the founder. The founder may have a decent salary, but income is not wealth and that income stops if the business fails.
- lsc 13y ago
  >but income is not wealth and that income stops if the business fails. Sure, sure, I'm just saying, that "decent salary" ought to make the student loans a non-problem. At a minimum, if I'm investing that much in a company, I want to pay the founders enough that they focus on the company, not on personal finances. More to the point, well, if you are a good enough negotiator to talk investors in to letting you control that much money, well, you are probably a good enough negotiator to negotiate a little something-something for yourself. I mean, I'm not saying millions a year, but certainly enough that things like student loans go away.

31reasons 13y ago

Its like saying, A horse is a winner if there are more bets on it in the race.

beachstartup 13y ago

yeah but it sure does generate clicks from people who don't know how the system works though.