Though I at least partially agree with the overall sentiment, he seems to be forgetting two things.
1) Much greater than 1 in 10 VC-backed companies succeed (from the founders' perspective). 1 in 10 return the fund, as Fred Wilson would say. Many others score a multiple that is lower for the VC, but in general if a company returns a VC 2-3x, the founders made millions.
2) Many startups change ideas midstream. This is largely why VCs invest in people. Whatever that silly game that eventually became flickr was called, it had users. But it wasn't going to make anyone rich.
Of course past performance doesn't indicate future results, so you can't simply say "50% of the startups this firm funds get rich, so my chances are 50% if they fund me." But I'd guess that the average funded startup still has a much higher EV, from the founders' perspective, than ones that aren't.
If a startup returns 2X-3X, the founders won't necessarily make a lot of money.
A lot depends on the liquidation preference in the financing terms. Although not common these days, there was a time when VC deals were structured such that a large percentage of an exit went straight to the investors before the founders saw any money.
That's why I said in general. It definitely depends on your valuation and terms (participating preferred can rape a 2x exit) but if you take a few mil in VC money on a few mil premoney, then sell for 3x, you probably got rich.
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Though I at least partially agree with the overall sentiment, he seems to be forgetting two things.
1) Much greater than 1 in 10 VC-backed companies succeed (from the founders' perspective). 1 in 10 return the fund, as Fred Wilson would say. Many others score a multiple that is lower for the VC, but in general if a company returns a VC 2-3x, the founders made millions.
2) Many startups change ideas midstream. This is largely why VCs invest in people. Whatever that silly game that eventually became flickr was called, it had users. But it wasn't going to make anyone rich.
Of course past performance doesn't indicate future results, so you can't simply say "50% of the startups this firm funds get rich, so my chances are 50% if they fund me." But I'd guess that the average funded startup still has a much higher EV, from the founders' perspective, than ones that aren't.
If a startup returns 2X-3X, the founders won't necessarily make a lot of money.
A lot depends on the liquidation preference in the financing terms. Although not common these days, there was a time when VC deals were structured such that a large percentage of an exit went straight to the investors before the founders saw any money.
That's why I said in general. It definitely depends on your valuation and terms (participating preferred can rape a 2x exit) but if you take a few mil in VC money on a few mil premoney, then sell for 3x, you probably got rich.
Dude, what YC business were you involved in? I never did find that out...
draftmix.com
That'd be Game Neverending.
And a truly wonderful game it was. Me and many others still miss it terribly!