RIP Philo

Californian VC

Did I tell you I've got a VC from the startups region interested in my software?

I know a few things about VCs and they had them all. Essentially they were enthusiastic about my idea and offered me this deal:

- They'd have it all, 100% of the US-based company, the IPs, the decision who gets dividends if any.
- I should quit my job right now and dedicate 110% percent of my full time to building the product, all on my savings of course.
- When all is done and ready and making money, maybe they might think about hiring me as a maintainer for the software while a team of real engineers take it to next level. Otherwise, the joy of having made that initial money-making prototype should be enough reward for me.

What else you know about these guys? I politely declined the offer to a(n unspecified) future date.
Permalink Io 
August 7th, 2018 11:08am
Permalink Random Lurker 
August 7th, 2018 11:21am

Yep. Also known as "How to get fucked."
Permalink RC 
August 7th, 2018 11:26am
Go watch the scene in the first Matrix, when Neo is in the room talking to the agents.

"Sounds like a really good deal"
Permalink Send private email xampl9 (Moto phone) 
August 7th, 2018 11:26am
So far there's nothing they "offered" which I cannot get by myself involving less money, more competence and 100% of the shares, minus 40% of course in national taxes (part EU now).

But I'm paying them regardless weather I've got a business or not. As employed guy (thus not starving, I'm paying 55% actually).

And if not EU, there were always the Habsburgs, the Ottomans, the Russians. Recently read a book by a local historian who proved it wasn't that unprofitable paying even a 40% tax (and it was lower in those days). Guess who profited most, LOLz if you don't know. In this order:

1) The gentry (me at the moment).
2) The small nobility.
3) The big shots.
Permalink Io 
August 7th, 2018 11:36am
>I politely declined the offer

You do understand that their initial offer was the start of the negotiations, right?
Permalink James Griffin 
August 7th, 2018 12:53pm
He understands that perfectly. He also understands that in negotiations if the first offer is so outrageous you wouldn't accept it no matter how desperate you are, then the other party is negotiating in bad faith and there is no point to responding with a counter offer, the appropriate strategy is to walk away.
Permalink RC 
August 7th, 2018 1:01pm

No point for a third world war.
Permalink Io 
August 7th, 2018 5:29pm
Forall I know I'll do everything I can so the next round of "negotiations" they can just kiss my ass.

And I won't "negotiate" until I'm exactly there.
Permalink Io 
August 7th, 2018 5:37pm
Their offer wasn't appropriate even for #1, let alone #3.

Cultural differences or not, from tomorrow I'm learning Russian.
Permalink Io 
August 7th, 2018 5:51pm
Even if it was a serious business, there are lots of ways VCs can screw you over.  For example, read about Ars Digita.

Whatever lawyers you hire, the VCs have better lawyers.  The VCs are repeat customers, and you're hiring a lawyer once.  Your lawyer might sell you out in the hope of getting referred for bigger business later.  (I.e., your lawyer screws you over, and then the VCs recommend him to other startups or VCs.)

There could be 100 clauses in the contract that can come back to bite you.  Your lawyer might find 99 of them if he's good, but there's still that one he missed.

As the Ars Digita example showed, things like being able to veto key hires can become very valuable in a dispute, because the VCs can just veto every choice.  Or they keep vetoing until you accidentally recommend someone they know will sell you out.
Permalink Send private email FSK 
August 7th, 2018 6:43pm
You need to have final say in literally every matter. The VC is buying a portion of your company, not control of it. If they want control they must be clear about it and pay accordingly. But that's not their MO and will never happen so never give up final say.
Permalink ,ndo 
August 7th, 2018 8:03pm
>If they want control they must be clear about it and pay accordingly.

What fools gullible people is that they PRETEND to not be getting control, but then rely on clauses in the fine print to take control.

For example, in Ars Digita's case, there were supposed to be "independent" directors that balanced the VCs, but the VCs had a veto.  So the VCs vetoed everyone who was proposed.  Letting the VCs veto board members sounds reasonable, but then they can abuse it to veto everyone.  There are lots of little clauses like that.

If I bootstrapped a business that became large enough for VCs to care, I'd insist on selling them 51% of the company and cashing out an amount that seemed reasonable.  Then they could do whatever they wanted and I wouldn't feel bad about being forced out.  (I know that I will likely never bootstrap a successful business at the $1M+ revenue level.)

Of course, a VC is less likely to agree to this.  If a non-rich person has all their net worth tied up in one company, it puts a lot of pressure on them.  The VCs invest in multiple companies, but don't care much if one fails.  They're willing to ruin 20x companies chasing high growth to get a potential 100x+ return.

That's also why VCs and small founders don't have aligned interests.  The VC wants a small chance of a huge return.  The founder wants a lerge chance of a modest return.
Permalink Send private email FSK 
August 7th, 2018 9:08pm
> read about...

OK, this is the link from the founder.

I recall seeing all this on Silicon Valley...
Permalink RC 
August 8th, 2018 4:48am

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