Yeah, I agree. For VC funded, the investors won't be getting a good return (if any) on their investment. They'll probably lose money after all the venture banking fees are out of the way.
I think the question of what is a good return these days is a bit crazy. For this size company VC's should be looking at wanting a $150-300m exit on the low end. But unicorns are polluting this kind of idea.
For non-VC funded (bootstrapped, etc.) it's about an expected sale price for an established minimally growing company.
Here's the ground truth: if you build a company with someone else's money, they're going to get a huge chunk of the upside, and the original management is going to retain control only as long as they hit their numbers.
Hopefully, nobody is saying employees shouldn't be wary of VC funded companies. They definitely should.
No, that's not the ground truth. That's the rationalization that founders tell themselves to justify being screwed over.
If you take someone else's money, they should get ownership proportional to their investment, yes. Their impact on whether original management retains control should be proportional to their ownership.
The problem is, the crazy ideology of VC worship that has taken hold allows VCs to get disproportional control and chunk of the proceeds.
People are saying that founders shouldn't be wary of VCs. VC blogs are full of propaganda and rationalizations for giving them more control and more upside than is proportional to their investment. When the blogs make it to HN, the commentary is universally in support wit the rationalization that "they're taking risk, they need to protect it". They are taking a lot less risk than the founders who can only work for one company, nota portfolio... and the risk VCs are taking is covered by their equity. They don't need second and third helpings of control and equity to cover the risk.
I'm getting downvoted for saying VCs are idiots. (elsewhere people are getting upvoted for saying "Deniers are morons", so it's not the name calling. Its' the "if I can just get thur YC and get VC funding I'll have it made!" ideology that pervades HN.
> I'm getting downvoted for saying VCs are idiots. (elsewhere people are getting upvoted for saying "Deniers are morons", so it's not the name calling. Its' the "if I can just get thur YC and get VC funding I'll have it made!" ideology that pervades HN.
No, there's a critical difference between your statement and that one: VCs are an identifiable class of people. Saying they're all idiots (something you don't know, couldn't possibly know, and indeed is not only false but obviously so) is attacking a specific group of people. "Deniers are morons", while obviously not a high-quality thing to say, is closer to a tautology. Both break the HN guidelines, but the former is worse.
This is not ideological. One needn't agree with everything every VC ever did to insist that calling them all idiots is wrong, breaks the site rules, and is correctly downvoted.
Sam once wondered whether we should make it explicitly against the HN guidelines to attack whole classes of people. At the time I said that sounded too legalistic. But it stuck in my head, and I have to say that every example I've seen come up in practice since then has suggested the value of such a rule. This is a good example.
I'm certainly not here saying "if I can just get thur YC and get VC funding I'll have it made!". I bootstrapped my last company and am bootstrapping this one. The mathematics of VC are a big part of why.
I don't understand the question. If the money isn't very valuable, it buys less equity. Companies who raise money typically talk to tens of firms looking for the best terms.
This isn't even good snark. It doesn't make sense. Venture capitalists aren't investing their own money. They're taking money from other people's pension funds. They can't just give people's retirement funds to software developers to be nice.
You're certainly not paying for 24 people's salaries for 3 years with a $3m investment unless the company hits profitability very quickly (within the first year).
True, but I think lots of folks here have no idea how much revenue you have to bring in to cover 20+ employees. Lots of people think it's just salary*20.
Well in a software company salary is generally the dominating factor, so it is on the order of what you mentioned (times a multiple depending on how cushy the amenities). In my unqualified estimation, the multiple can kill you... seems like about 2x salary for SF, 1.6x for NYC, though my company prides ourselves on keeping it a lot leaner than many of our compatriots.
I think that multiplier is what bane was alluding to. Incidentally, your numbers seem low for software devs - I'm fairly certain I cost well over 2x salary (NYC). Although my company prides itself on compensating well, so maybe most startups run a lot leaner than that.
I think the question of what is a good return these days is a bit crazy. For this size company VC's should be looking at wanting a $150-300m exit on the low end. But unicorns are polluting this kind of idea.
For non-VC funded (bootstrapped, etc.) it's about an expected sale price for an established minimally growing company.