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Because the founders have created the business and have created several million dollars of value (based on the VC's own valuation). Why should they not be able
by toasted 12y ago
Because the founders have created the business and have created several million dollars of value (based on the VC's own valuation). Why should they not be able to cash out for a lifetime of financial security?
- mikecb 12y agoif the founders create the value, why would you give them a chance to leave with discounted future profits before the value is realized in a real (not discounted) profit stream?
- toasted 12y agoBecause regardless of whether profit is there, they should be able to extract value if they want to.
- mikecb 12y agoIf profit isn't there, value is theoretical. You're just taking money from the VC (and the business' growth). You may find future rounds harder to fund.
- toasted 12y agoSo amazon's market cap of 144b is theoretical because they don't have profits? And bezos should be paid enough salary to survive but not so much that he is no longer "hungry"?
- tptacek 12y agoFirst, Amazon's valuation is theoretical. Their valuation is so detached from their fundamentals and so dependent on a narrative about their future performance that Matthew Yglesias describes them as "a charity benefiting American consumers funded by Wall Street". Second, there's no valid comparison between the A-round valuation of a startup and Amazon, a giant publicly traded company with a decades-long track record and huge cash flows. Mutual and pension fund managers invest in Amazon. To a first approximation, none of those managers directly value startups.
- tptacek 12y agoClearly they didn't solely create the business, because they had to take other people's money to do that. Why should we single them out for special treatment?
- beaner 12y agoShould someone be rewarded with "a lifetime of financial security" if their product turns out to be hype that has no value two years later?