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The Deal on the Table (1994) (fourmilab.ch)
59 points by lpolovets 125 days ago | hide | past | web | 21 comments | favorite

Autodesk stock is up 28x since the "1987 high" mentioned in the article (so that forgone $37M could be $1B now)


Taking a deal akin to what was offered would have been a poor decision in light of the profits Autodesk was making at the time. Additionally, the concept that shopping around between investment offerings is dissuaded at all is a serious abuse of the market, distorting said market heavily in the investor's favor.

Hindsight is 20/20. Decisions should only be evaluated based on the information available at the time of the decision. Was Autodesk that successful at the time of that negotiation?

> at the time of these negotiations, generating sales equal to the size of the deal every month and generating after-tax profits close to the size of the deal every quarter.

Yes, they were already profitable and growing like crazy (30% month on month).

> But, our Distinguished Financial Advisor informed us that this would constitute ``shopping the deal'' when ``a deal was on the table'' which was right out by the genteel standards of the venture community

What does this mean?

It means that the VCs have formed an informal thrust and are colluding to prevent companies from getting a better deal, just not saying it in so many words.

Shopping a term sheet means that when you get an investment offer, you go shop the term sheet around to other VCs to try to get a better offer. As you might expect, VCs don't like that. http://cdixon.org/2009/09/02/dont-shop-your-term-sheet/

VCs might not like competition, but maybe it would be good for them!

Agreed, Considering the "C" stands for Capitalist, a competitive market shouldn't scare them. IMO they want you to play by their own rules, not "free" market rules.

Did they not have syndicates in that era? How do you syndicate without in some sense shopping?

He seems to be arguing with a nod and a wink that SV VCs form a sort of cartel.

this was incorrect only after signing an actual term sheet is it considered shopping the deal.

Would be very interesting to see the evolution of term sheets over the last few decades. The shifting power balance between founders & investors, seeing novel provisions become boilerplate etc.

Cooley and Fenwick track a lot of term sheet trends. See https://www.fenwick.com/topics/pages/topicsdetail.aspx?topic... and https://www.cooleygo.com/trends/.

The Fenwick reports go back at least a decade. Maybe someone will a lot of free time will put them on a graph someday :)

Multiple rounds of VC financing is a relatively new thing. In the early years, it was typically one round of VC financing to get the thing working, then profitability, then exit via IPO.

[OT] And since you're there, try their "yoursky" tool:


Saying this because I didn't know it for years: Fourmilab isn't a "they", it's just the personal website of John Walker, the founder of Autodesk and a fantastically interesting person. Not to be confused with "fermilab" of course, which is a United States national lab that does high-energy particle physics.

There are a ton of very interesting things on his site, including a DIY RNG that uses a radioactive source and an event counter: https://www.fourmilab.ch/hotbits/hardware.html

I wonder if anyone else has built a similar device to this, it seems like it'd be very popular among hackers.

the actual date is 1984 not 1994.

Yes, there are 2 dates:

1984: the date of the actual events

1994: the date of the online book (4th edition) describing those events: https://www.fourmilab.ch/autofile/

The fourth edition of Autodesk File that this leads into was published in 1994.

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