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Why Valley Vcs are Like the Mob (business2.com)
10 points by Harj on Feb 28, 2007 | hide | past | web | favorite | 4 comments

So Google doesn't buy YouTube without VCs?

That's what I'd say if I were a VC!

VCs certainly live in a very chummy world, but their valuations are not stingy. In fact they're artificially high, because the structure of VC funds pushes them to make excessively large investments, and that in turn means valuations have to be high or the founders aren't left with enough stock to keep them interested.

one thing we've realised from talking to smart people is that founders shouldn't get caught up in the idea of high valuations being a good thing. initially we thought the higher valuation we got for our company the "better" we had done.

that's wrong. high valuations both limit your options and make it harder for you to give a good return for your investors. if this is your first startup that's not what you want to do. from now on i'll always be aiming for a reasonable valuation and not wasting time trying to drive it up by the odd %.

"Ajax, AdSense & Arrogance"... good one.

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