
Why We Said “No” to a $40M Round - pixelmonkey
https://blog.parse.ly/post/6282/why-we-said-no-vc-money/
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andrewstuart
Just a UX comment .... often one of the key values of a blog is to draw people
to your website to find out about your product/service.

For me, the typical flow is to go to blog and click on the logo at the top.

For the optimum marketing outcome, the top logo links to your main website.

In this case, the top logo links back to the blog. This site possibly lost the
marketing opportunity because now I have to go to the trouble of clicking in
the URL and changing it to www from blog. Might not sound like much but I
think some people are willing to spend a few seconds having a look at
something if it is incredibly easy to do so, but can't be bothered to make it
happen if it requires anything more than a click.

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stevenleeg
I see this mistake on so many company blogs! It's always frustrating and
usually ends up with me dropping off.

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askz
My most frustrating issue is when you have some "home" link and it points back
to the home of the blog, logic right ?

But why do you have "articles" or even "blog" link aside ?

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ChuckMcM
Smart move, tough to do. Remember that Venture capital is the most expensive
capital you will ever raise, it costs you equity, it costs you control, and it
costs you opportunity.

Something to consider once you are profitable is that banks are more
comfortable extending a line of credit to you, that can be used for those
'unexpected' or 'opportunistic' capital requirements while not incurring a
loss of equity now or in the future. Remember, banks make money the old
fashion way, they charge interest on what they loan you :-).

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fossuser
Isn't it easy to raise money when you don't need it and hard to raise money
when you do?

Why not just take the $40M if you can negotiate a strong position (which you
can if you're willing to say no to it anyway) and just have more runway to
protect yourself?

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methodover
Isn't the problem with that that investors expect that their capital be
deployed immediately, and if you can't do that they aren't interested?

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jacquesm
> Isn't the problem with that that investors expect that their capital be
> deployed immediately, and if you can't do that they aren't interested?

That strongly depends on the investors. The vast majority is perfectly content
with a spending schedule that runs over one or more years.

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bkanber
Modern guidelines for valuing a tech company in an M&A:

\- The technology asset is worth $3-5M, no matter what it is.

\- Higher AWS bill = better product.

\- EBITDA is not important, you can ignore that.

\- What's the QoQ revenue growth for the last 8 quarters? Doesn't matter if
margins are going down. Only revenue growth matters.

\- More employees = better company. Obviously.

\- Valuation should be directly proportional to venture capital raised.

\- You have a remote engineering team in the US? Why not go offshore or
nearshore?

\- Make sure it's an asset deal, not a stock deal, so that you can write it
off but the founders get double-taxed.

\- Design earnouts such that they are unachievable.

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nunez
Here's something I've always been confused about. How does employee headcount
get factored into an acquisition or public offering? Why is having so many
more employees than needed a "good thing" in these situations?

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moxious
The poster is a bit making fun of this mindset; more employees isn't obviously
better. But the "growth at all costs" mindset is real, and in that worldview
rapid growth is a sign of success because you're building capacity to capture
the market.

In reality the plan is everything because without a great plan more people
means just more burn, and hitting the wall sooner.

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softbuilder
There is a scene from Silicon Valley about taking less:
[https://www.youtube.com/watch?v=s1w5R2PGCb4](https://www.youtube.com/watch?v=s1w5R2PGCb4)
(NSFW language)

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cableshaft
Just saw that episode again recently. There's some logic to accepting less on
purpose, yeah.

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btilly
It was written some time ago, and was based on a study of spinoffs rather than
startups, but _The Innovator 's Dilemma_ spoke directly to this point.

One of the consistently common and bad mistakes that they found is to over-
invest for a market segment. If you give people $100 million for a market
segment with growth potential that can only currently support a $20 million
company, they will spend it and then must find a way to justify it. Which
means that they will be forced to search for a business opportunity that may
not exist, rather than being satisfied with the one which clearly does.

This may be a special case, exactly because the spinoffs were into an inferior
(but cheaper) technology for an existing market, and their eventual success is
based on the prospect of an existing market switching to a new technology in a
way that wipes out established vendors. So it was critically important is that
the spinoff successfully embed itself into the marginal current market.

But I still like the way they summarized their observations of many attempts
at spinoffs. "Bad money is impatient for growth and patient for profit. Good
money is impatient for profit and patient for growth."

Don't over capitalize. Focus on being profitable. Be in the right line of
business, and growth will come.

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CurtMonash
Actually, Microsoft was pretty much self-funded. (Except perhaps for some help
from the Bank of Dad.) They eventually took a bit of VC mainly to get the
outside advice.

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adventured
> Except perhaps for some help from the Bank of Dad.

Based on what both Gates and Allen have said, it was completely self-funded to
get started. The Gates family contributed no money. Microsoft was founded with
a few thousand dollars and they were profitable / break-even almost
immediately. Gates and Allen had just made a nice chunk of money doing
contract work on a large scale power system before pursuing the Altair
opportunity.

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jlebrech
it's nice to get free food and lodgings while building a company

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justinzollars
Good for you. You made the right move for your team and yourselves.

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danschumann
I'd be trolling if I said the lesson of the article was that when you (only)
need $5m, the key is to realize that you already have it; so I'll say the
lesson is to leave no stone unturned, especially the stones closest to you.

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unabridged
Imagine how much they could have raised in an ICO. Probably could have got
$40M without even giving up more than 10% equity and no strings or board
members attached.

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rootedbox
_sidenote_ Their blog loads faster than their website.

