

Cashing Out Start-Ups Gets More Complicated - petethomas
http://online.wsj.com/article/SB10001424052748703312904576146372229938338.html

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bugsy
3 years to do a sale is far too long. By the time things are ready to go
there's no point, the market has long moved on.

What could really be causing this? It's not the stated reasons because if it
was the problem would have been solved.

I suspect that like with divorce attorneys, it has to be because lawyers are
winding up their clients to create contention and increase their own profits.

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j_baker
You mean people might have to build a product that people will buy in the long
term rather than trying to flip a quick buck? Madness I say.

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URSpider94
I think that you are -- incorrectly, unfairly and without data -- assuming
that the companies being discussed in this article are not focused on
delivering long-term value to customers.

Personally, I just recently went through this process after 10 years of
helping to build a company. A decent portion of my payout was held for over a
year in escrow, while I had to pay income taxes on it, as of the deal closing
date, as earned income. I would hardly characterize my decade of work as an
attempt to "flip a quick buck".

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dtby
Would you like him to apologize because you made a bad deal for yourself? His
comment is over-broad and snarky, but it simultaneously makes a good point.

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URSpider94
At the risk of taking the troll-bait, I'm not asking for any kind of apology
or sympathy. I'm actually quite happy with the deal I got all in all, and in
any case, I wasn't at the table when the terms were set. I'm simply pointing
out that it's extremely naive to think that focusing on creating long-term
value for customers cures all ills.

In fact, we are in a period in business history where companies that have
achieved cash-flow positive with good growth and a sizable revenue stream are
at a loss as to how to free up cash for continued growth (and to reward early
investors and employees). IPO'ing brings huge overhead with Sarbox, not to
mention the requirement to manage the business to quarterly goals. Continued
venture funding is usually quite a bad deal, loans are still really hard to
get, and more creative options (like FB's private placement) are under lots of
scrutiny from the SEC.

That leaves a buyout or private sale as the two best options, neither of which
is an efficient transaction (ie unlikely to bring the highest value), and both
of which are likely to come with some unattractive terms.

As an entrepreneur, don't underestimate the importance of this question: once
you create a valuable business, how will you transform the equity that you've
created for yourself, your employees and your backers into cash?

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dtby
At the risk oif not being labeled a troll, you suggestion was that simeine had
nor considered the very difficult circumstances whic made you accept a deal
about which you feel compelled to complain on HN.

I have made an exceptional number of bad gambles in my life, butg I have never
felt the ned to either justify or disclaim responsibility for the choices I
made on a public forum.

If this sounds dickish, I apologize, sincerely. I have made the best decsions
of which I was capable at any moment in time... my failings do not tepresent a
failure on the part of those who depend on me.

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fleitz
The article talks about a deal struck in _MID_ 2008, mid 2008 sounds awfully
like two months before Bear Stearns crashed in September 2008, begetting
economic apocalypse. To take a 7% haircut from the peak of the market is not a
bad return. Especially good would be to be fully liquid during that period,
hindsight is of course 20/20 and buying GS during that period would have been
viewed as very risky, but again, in hindsight there would have been some
amazing opportunities sitting on $125 million in cash. A deal struck today
would probably be 20-30% less than mid-2008 valuations. There are an amazing
number of blue chip stocks that you could have bought in 08Q3 to 09Q2 that
would have doubled your money by now. I'm not familiar with the particulars of
the deal but it sounds like sour grapes on what was probably a great deal
retrospectively for the sellers.

