
Meaningful Exits for Founders (2016) - dpeck
https://medium.com/strong-words/meaningful-exits-for-founders-4c3b2baba6b4
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paulsutter
Key line

> a founder selling at the Series D price of $210M, would make the same amount
> of money at exit as they would have if they’d sold for $38M after having
> only raised a seed round

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gnicholas
It's an interesting stat, but are there very many companies that could sell
for $38M before raising a Series A?

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shin_lao
On point. It can happen if your company has great IP, or you managed to
capture a niche market.

When that happens it's a no brainer: sell. You can still build another company
while having a cushion for you and your family.

An exception to this would rule would be that you have a good chance at
becoming a leading company in your domain.

~~~
fergie
It depends. If you have nothing from before then selling for $2.2M is not that
great of an idea- you might walk away with $1.1M after tax. This would be the
equivalent of a modest bay area property, or 4-8 years SWE salary.

In other words- if you had a family, you would find it difficult to support
them and finance a new venture.

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jacquesm
Going from nothing to $1.1M in the bank after tax is 'leveling up', and if
you're smart you would take that chance immediately.

In your life there are maybe two or three opportunities for such a leveling up
and missing out on a guaranteed one is not something I would do. Of course if
you are _dead certain_ that you will be able to get more out of it you should
but if the certainty is anything under 75% or so you should probably take the
certain route and see if you can be smart to do it again through some other
route.

This is a tough call to make, but also a luxury problem, most founders never
get to that point.

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woah
What do you do after this leveling up?

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jacquesm
Try to find a larger table, and manage your risk very carefully because you
are still fragile and it is probably easier to go from $1M back to nothing
than it is to go from $1M to $2M.

The thing you definitely shouldn't do is change your lifestyle, that way you
will be almost certainly back to square #1 after a couple of years.

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dalbasal
There's always a problem with using averages, for subjects that are
innherently distributed oddly.

It's definitely useful to run through examples and the average case is as good
as any. But, beware assuming the average case is you, or more likely to be
you.

To boil this down... It may be that a founder is working for free or even
taking risks for free, by continuing rather than exiting.

This is true outside of startups too. Musk only owns 10% of Tesla. If the
board was going to hire a superstar CEO to run Tesla, they'd probably need to
give him that much equity anyway over time. So, they basically get him for
free.

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jerrre
I'd say for founders time spent is a much more important factor than it is for
VCs since a founder can only bet on one company.

I have no clue about average time between rounds but if we say 1 year for
every round, (1y for seed, 2y for A etc) only going from seed to A is a
meaningful improvement if you calculate $/y.

~~~
jacquesm
It's about the same in practice actually. Founders and VCs both have the same
critical resource: time. For founders because they bet on only one horse and
it needs to work, for VCs because they bet fractionally on multiple horses and
there are only so many bets they can place if the bets are to be meaningful.
If you multiply the chances of success by pay-out in case of success it turns
out the positions of a partner at a fund and a founder are roughly the same.
The biggest difference is that the founder has much more control over the
outcome than the VC (which is one reason why VC returns suck).

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GoToRO
Money it's just work in pure form. Even stolen money are someone's work, it's
just that the person holding the money is not the person that did the work.
But somebody did the work! I have no problem with money.

