"Yeah, it pretty simple. If it is hard to raise money figure out how you don’t have to—get to profitability.
That discipline is healthy. There are very few companies that have the hyper-growth that allows them to forgo profitability in the short-term and everyone wrongly assumes those examples are the norm, whether it’s a Facebook or a YouTube."
I think more Silicon Valley CEOs need to internalize this. They may have heard it, but from the looks of it, they have not internalized it.
It depends on your team/product. Are they going to build, max, a 1B business? Sure, than 10x is fine. Do they have potential for a 10B - 100B business? Than 100x return makes sense, because land grab and consolidation will likely be an aspect of the business - which requires significant capital and therefore returns.
> That’s what everyone says but how many 100x’s are there really? I’ve been doing this a long time and there just aren’t that many.
> I don’t have the same pressures of a fund in liquidity, timing or the need for 100x returns. If I can consistently get 5x to 10x I’d take that all day long.
How many investors, angels, VCs or otherwise, focus on the 5x-10x return deals?
And are 5x-10x deals safer, meaning that more of a sure thing, than the 100x deals in terms of return? I.e. are VCs being rational by focusing on the 100x deals since 5x-10x deals aren't safer, or are they forgoing safer and better returns of the 5x-10x for the chance to become movers and shakers of the largest players?
I've asked a VC this question before. They said that in theory going after 5-10x returns sounds great but in practice no successful VC firms use this strategy. They all make their money from the few who "return the fund".
It's a fairly honest reply. It means "you're not there yet". It's far from Yes, but it's not No; and a future Yes is not likely but not impossible.
You could try asking for specific things that require improvement but I don't think you'll get a useful answer in most cases. You'll hear some words back but all they will mean is "I am not in love with your company".
10x means much lower probability of failure in order to get any ROI at all. Failure, sadly, is a lot harder to avoid than founders and VCs would like. 100x means the overwhelming majority of investments can fail and you still make out like a bandit.
> I’ve been doing this long enough to know that the next big thing won’t happen as quickly as people expect. I am therefore willing to forgo those 100x returns and get 10x on things that are more certain and nearer term.
As always, it depends. If you're in a land-grab market with $100 billion potential and take the slow route, you'll be squeezed. If, on the other hand, you choose a market with a low ceiling, you'll likely be forced to finance with retained earnings and/or debt.
That's how pretty much every Angel invests. They want to exit at the B or C round, or have an acquisition in the mean time.
Angels and VCs are more often than not at odds because they have different economics they are playing for.
An angel puts in 250k? They would be thrilled with a 10M exit. Along comes a VC with a 5M A round and suddenly they need a 500M exit to feel like it was a success.
[+] [-] curiouslurker|8 years ago|reply
That discipline is healthy. There are very few companies that have the hyper-growth that allows them to forgo profitability in the short-term and everyone wrongly assumes those examples are the norm, whether it’s a Facebook or a YouTube."
I think more Silicon Valley CEOs need to internalize this. They may have heard it, but from the looks of it, they have not internalized it.
[+] [-] blazespin|8 years ago|reply
[+] [-] yinso|8 years ago|reply
> I don’t have the same pressures of a fund in liquidity, timing or the need for 100x returns. If I can consistently get 5x to 10x I’d take that all day long.
How many investors, angels, VCs or otherwise, focus on the 5x-10x return deals?
And are 5x-10x deals safer, meaning that more of a sure thing, than the 100x deals in terms of return? I.e. are VCs being rational by focusing on the 100x deals since 5x-10x deals aren't safer, or are they forgoing safer and better returns of the 5x-10x for the chance to become movers and shakers of the largest players?
[+] [-] a13n|8 years ago|reply
[+] [-] chicagogal|8 years ago|reply
[+] [-] kgilpin|8 years ago|reply
You could try asking for specific things that require improvement but I don't think you'll get a useful answer in most cases. You'll hear some words back but all they will mean is "I am not in love with your company".
[+] [-] rpedela|8 years ago|reply
[+] [-] 0xbear|8 years ago|reply
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] Karrot_Kream|8 years ago|reply
If only more founders thought like this too.
[+] [-] sharkweek|8 years ago|reply
https://www.youtube.com/watch?v=BzAdXyPYKQo
[+] [-] JumpCrisscross|8 years ago|reply
[+] [-] AndrewKemendo|8 years ago|reply
Angels and VCs are more often than not at odds because they have different economics they are playing for.
An angel puts in 250k? They would be thrilled with a 10M exit. Along comes a VC with a 5M A round and suddenly they need a 500M exit to feel like it was a success.
[+] [-] ouid|8 years ago|reply
[+] [-] anon4728|8 years ago|reply
The core, unscalable challenge is finding smart and motivated investors whom can add value.
For example, take Raj Parekh:
- nice guy
- hustler's hustler
- can act as anything from investor to sales to VP, without getting too bossy, just unblocks problems and moves forward
- knows the enteprise space
That's the ideal investor:
competent, helpful, humane, relentlessly resourceful and generally willing to roll up sleeves as an equal part of the team.