4 ms·
Don't the original investors usually get their investment back from these things? So Twitter pays the investors $1.7M and pays the founders $200K per year as a
by unreal37 13y ago
Don't the original investors usually get their investment back from these things? So Twitter pays the investors $1.7M and pays the founders $200K per year as a dev team.
How does that usually work?
- coolsunglasses 13y agoThat's about right.
- jmathai 13y agoI think the parent was inferring that recouping $1.7M isn't viewed as a success for a VC. In general I think acquihires are moderate successes for the founders. Not just financially but external validation of their collective skills as a team.
- paulbaumgart 13y agoYeah, that's pretty much the value of a talent acquisition the founders: enough cash and credibility to make things go a lot faster the next time around.
- bdlbdl 13y agoI highly doubt it was that little. I've seen quite a few acquihire term sheets and the payoffs are a lot better than you would think for the founders. I bet the investors get their money back, the founders of Cover get $2m - $4m each in stock alone (vesting over 4 years of course), and the employees get $500k / year in total comp.
- DrJokepu 13y agoSomeone has explained it here a couple of years ago that VCs generally view them as failures as they have investment pools with lifetimes of 7-10 years and each pool is expected to yield something like a 10x profit at the end of the period. There's not much difference between losing their original investment and getting it back as they will have similar effects on the performance figures of the pool at the end of the cycle.
- tomkarlo 13y agoDepending on whether a fund is still in its reinvestment period, they may also not be able to put that money to work - it may automatically go back to the LPs, who aren't generally very happy to just get their money back when they're expecting 25% or higher IRRs.