

Paul Graham’s ‘lowball’ accusation of Google Ventures - csmajorfive
http://venturebeat.com/2012/09/07/lowball/

======
mikeryan
Wow what a shitty article. This whole thing is killing pg's first comment in
the thread yesterday

 _Just so everyone understands, I was not saying that Google Ventures is a bad
investor and should be avoided. If we thought that, the email would have been
a lot shorter. I was just talking about a structural problem that happens when
you've already raised some money on a convertible note with a valuation cap,
and an investor offers to invest at a lower cap_

From an author who obviously _read that thread_ she's completely ignoring what
he said with crappy statements like this:

 _Considering this comes from a man who just asked his portfolio to blacklist
an entire venture firm, this might read as a rather contradictory statement._

~~~
Smudge
Ignoring the article's contents for a second, let's look at how clearly
doctored the image is to make PG look insidious.

Before: [http://cdn.mashable.com/wp-content/uploads/2010/04/paul-
grah...](http://cdn.mashable.com/wp-content/uploads/2010/04/paul-graham.jpg)

After: [http://venturebeat.files.wordpress.com/2012/09/pg-
lowball.jp...](http://venturebeat.files.wordpress.com/2012/09/pg-lowball.jpg)

~~~
arkonaut
What a contrast a zoom and filter can have on an image... The actual image is
him intently/genuinely listening to what I can only suppose is a question from
an audience member of some kind. And the Venture Beat cropped version is
supposed to make it look like he's coldly calculating someone's demise.

~~~
Smudge
It's hard to tell, but the image has also been rotated, which makes it seem
like he is leaning forward more intently. Click the little "compare" link on
the TinEye result to see what I mean:

[https://www.tineye.com/search/b2e69b229df764bf6bd92bb4ca65f1...](https://www.tineye.com/search/b2e69b229df764bf6bd92bb4ca65f11170822d8e)

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jvrossb
How did this become such a big deal? Raising money, especially for the first
time, is a stressful experience full of uncertainty. When we did it, one
investor (not Google Ventures actually) low balled us and a lot of our peers.
We were first timers and it freaked us out.

PG would have no problem with writing "avoid Google Ventures". He didn't
because that's not what he meant. It's simply about saying hey I heard that
Google Ventures lowballs, if they do it to you don't freak out.

------
btilly
For more discussion, see <http://news.ycombinator.com/item?id=4486835> which
was posted previously.

Here is a td;lr of this particular take on the topic.

 _Google Ventures' low valuations are justifiable for the same reason that
YCombinator's low valuations are justifiable - in addition to the money they
are providing a tremendous amount of support to the companies that they invest
in, and the value of that is bigger than the dollar amount invested. However
Paul Graham may be biased because Google Ventures is a reasonably direct
competitor._

Most of that is reasonable. But my personal guess is that the final point of
the article is entirely wrong. My personal guess is that Paul Graham is behind
the scenes dealing with an unfortunate startup that ran into trouble due to
the issue he's talking about, and thought it wise to warn others. Of course it
is in nobody's interest for him to reveal which startup or the nature of their
trouble. So we (hopefully) will never get the real story.

------
alecdibble
This article annoys me. Here seems to be the general structure:

* Generalize PG's statement until it is basically irrelevant to the point he was trying to make.

* Fill in a whole article speculating about the generalized interpretation of PG's comments.

* Say what PG actually meant in the end without showing any indication that the author actually understood what he was talking about.

* Paste a badly edited "primer" trying to explain the argument because the author obviously doesn't get it.

------
naz
_But in talking with a slew of Y Combinator alumni from the past three years
of YC batches, we found that Graham himself takes between 5 percent and 7
percent of companies for amounts ranging between $12,000 and $20,000. Those
amounts aren’t any great secret; YC publishes approximations on its own site.
But while the founders said YC insisted that these terms had nothing to do
with their companies’ actual valuations, on paper, it made the startups worth
between $228,000 and $287,000 on the high end._

This is based on the faulty assumption that $12-20k is all you get for getting
into YC.

~~~
nvoorhies
Or based on an assumption that YC gets more than just equity out of the people
that get into it.

------
scdoshi
This article written purely just to generate traffic. The author manufactured
an 'investor battle' out of this? What?

~~~
ChuckMcM
It does read a bit like some classic Arrington from the early TechCrunch.
Clearly it fills some need or it wouldn't get the traffic or attention that it
does. Its like reading 'Dear Abby' to feel better about your own life. After a
while you come to realize that its not 'real' in the sense its sensationalism
for sensationalists sake, ValleyWag2.

The only part that bothers me is that these kinds of people thrived during the
dot com 'boom'. So their reappearance, like the swallows in Capistrano, seem
to herald a change in the climate.

------
senko
Wow, the hate.

I don't know whether the author (or VB) has a beef with YC, but it sure looks
so here. (I'm not running a startup nor am I especially into SV soap opera,
but this piece speaks for itself).

~~~
firefox
I got the same impression, and it's probably coming from the author who
clearly doesn't really understand how incubators work.

------
jordanmessina
In regards to the company complaining about pg's "valuation", if they felt
they were far enough along to raise a priced round of funding, then why didn't
they do that instead? Companies don't enter an incubator for the funding, so
comparing that to true valuations is ridiculous. This is just a poor attempt
at trolling YC and pg.

------
tlrobinson
_"he’s trying to keep his money-makers from defecting to a competitor."_

This makes no sense. It was a private email to existing YC companies. YC has
already make their investment, there's no "defecting" to be done.

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tvladeck
>> Both entities are here to make money from the labor and success of
entrepreneurs, essentially operating in a predatory role.

What is this person doing writing for Venturebeat?

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pbiggar
> The kicker, and the truly poetic part of all this, is, as Graham hints, that
> all these valuations are made up, anyhow.

Of course they're made up, everybody knows they're made up. They are a
response to market demand to invest in companies at that stage (especially
ones that come out of YC). The same is true of companies entering Series A,
IPOing, or publicly available.

I'm surprised at VentureBeat's reporting here. If you're experts in "Venture",
I would expect you to know that valuations are always made up, without needing
PG to hint it for you.

------
Ahmes
Is it just me or does this author have an affiliation with TechStars? (For
instance: see <http://vimeo.com/5346690>)

~~~
mmahemoff
She did an interview with another accelerator three years ago, that makes her
biased against YC? She's a tech journalist who's done a lot of interviews.

------
mirsadm
This seems to have just gotten out of hand. How did this memo get "leaked"
anyway? I don't think article is as negative as others are stating but it
seems unnecessary.

