
Pacing Yourself - harscoat
http://www.avc.com/a_vc/2010/11/pacing-yourself.html
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kurtosis
This confuses me. If it is impossible to time the market, then why does he
think it is "pretty clear that the market is getting overheated"? [edit: in
the comments he explains that he's looking at "revenues and cash flow and
discounted cash flow to get values", but if these are only weak predictors
that don't enable one to time the market, why worry?]

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neworbit
Other people are willing to pay more than he is for the same opportunities.
When the other guy on the block is willing to spend more money than you think
reasonable, it's very possible that the market is overheated.

I happen to think this is total crap: VCs will completely turn the screws on
you when the economy tanks and behave in an adversarial and predatory fashion.
When things are going better than expected, prices rise - and he doesn't like
that he has to pay more. If you have revenues and cash flow, the fact of the
matter is that you probably don't need VC and can walk away from stupid
offers.

This is the usual nonsense about "smart investors" - he basically says
outright that people should go with his firm despite other people offering a
better concrete deal because of his intangible connections and expertise.

But the fact of the matter is that you CAN value those. If the choice is
between getting $7M and $15M for the same chunk of your firm, you're basically
paying a $8M premium for his potential assistance in selling the firm,
lukewarm commitment towards raising future capital, and whatever value his
rolodex has in your space divided by the amount of time he's actually going to
spend on your startup. But that is absolutely crazy. You're getting maybe 15%
of the VC's time and paying $8M for doing so. Seriously, that's nuts.

Instead, hire a decent investment banker and be prepared to pay several
hundred thousand to do so, hire a couple great business development people who
are actually in your space as opposed to in the venture capital space, and go
to town. If your VC tells you that their halo effect is worth more than a
million bucks, (or alternately if you're talking rather large numbers, if the
delta between one money source and another is more than say 20%) you need some
pretty concrete reasons as to why.

TLDR: Shop around for capital. Fred probably is worth a premium - but not a 2x
premium. Cash flow wins and VC puffery doesn't.

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gfodor
This is decent advice tarnished by an ad-hom, you can do better than this!

