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The answer to the question is supposed to be "because it's driving startup valuations sky high", which I assumed is understood as a bad thing, but I see your po

The answer to the question is supposed to be "because it's driving startup valuations sky high", which I assumed is understood as a bad thing, but I see your point. I have written about that before - it has all sorts of problems like trouble with fundraising for later rounds, inability to get acquired, etc.

alexeisadeski3 13y ago
First world problem: "I can't get acquired because my valuation is sky high!" Just sell for less. If everyone else demands high valuations, it's easier to sell, not harder.
- byoung2 13y ago
  Just sell for less Your investors gave you $50 million at a $500 million valuation. Google wants to acquire you for $100 million. Your investors may not let you.
  - alexeisadeski3 13y ago
    "I raised too much money!" Or you can cancel some of your own shares and take the $50M.
  - RyanZAG 13y ago
    That's a nice position to be in. Disolve some of your shares: investors take $70 million, you take $30 million. Everyone should be very happy. Or if you still have runway and believe in the business, keep going and raise that $100 million. It sounds like the problem of having scaling issues: it's a problem, sure, but it means you're already a success. If you never got that $50 million to begin with because valuations weren't high, then you might be a failure now instead.
    - byoung2 13y ago
      That's a nice position to be in. Disolve some of your shares: investors take $70 million, you take $30 million. Everyone should be very happy. Be sure to check your term sheet. It could be that your investors have a liquidation preference that includes a multiple. Based on my (admittedly limited) understanding, if your investors gave you $50 million for 10% of the company, with a 2X multiple liquidation preference, they would be entitled to the first $100 million of any sale, plus 10%. So you may be able to sell for $100 million, but you wouldn't see a dime.

alexeisadeski3 13y ago

First world problem: "I can't get acquired because my valuation is sky high!" Just sell for less. If everyone else demands high valuations, it's easier to sell, not harder.

byoung2 13y ago
Just sell for less Your investors gave you $50 million at a $500 million valuation. Google wants to acquire you for $100 million. Your investors may not let you.
- alexeisadeski3 13y ago
  "I raised too much money!" Or you can cancel some of your own shares and take the $50M.
- RyanZAG 13y ago
  That's a nice position to be in. Disolve some of your shares: investors take $70 million, you take $30 million. Everyone should be very happy. Or if you still have runway and believe in the business, keep going and raise that $100 million. It sounds like the problem of having scaling issues: it's a problem, sure, but it means you're already a success. If you never got that $50 million to begin with because valuations weren't high, then you might be a failure now instead.
  - byoung2 13y ago
    That's a nice position to be in. Disolve some of your shares: investors take $70 million, you take $30 million. Everyone should be very happy. Be sure to check your term sheet. It could be that your investors have a liquidation preference that includes a multiple. Based on my (admittedly limited) understanding, if your investors gave you $50 million for 10% of the company, with a 2X multiple liquidation preference, they would be entitled to the first $100 million of any sale, plus 10%. So you may be able to sell for $100 million, but you wouldn't see a dime.