Y'all are a bunch of wankers!

Startups can die by raising too much money


I know someone at Jawbone who saw the writing on the wall last year and left. Smart move.
Permalink NPR 
July 11th, 2017 3:04pm
When you raise money at a huge valuation, you need to eventually sell at an even bigger valuations, so that the investors get their money (+liquidation preference) and there's money leftover for the common shareholders.

If you raise $500M, your investors expect your burn rate to be close to $500M/year.  This way, you're forced to beg for more money in another year.

You can't raise $500M and then have a burn rate of $10M/year.  Your investors would never go for that.

Consider Uber.  There's almost no way they can ever cash out for their current valuation, either via an IPO or a bigger fool buyer.  A down round would wipe out the common shares, employees, and early investors.

If Uber had kept its valuation at $500M, then it would be a viable business going forward.
Permalink FSK 
July 11th, 2017 7:00pm
Maybe they'll stay private.

But if the company will never go public, that might hurt their ability to recruit employees, since they can't offer the promise of IPO riches.

I know a couple people there, wonder how they feel about the prospects.
Permalink NPR 
July 12th, 2017 9:00am

This topic is archived. No further replies will be accepted.

Other topics: July, 2017 Other topics: July, 2017 Recent topics Recent topics