http://www.bothsidesofthetable.com/2010/04/14/want-to-raise-money-more-easily-clean-up-your-own-shite-first/ Entrepreneur turned VC Mon, 14 Nov 2011 23:37:00 +0000 hourly 1 http://wordpress.org/?v=3.2.1 http://www.bothsidesofthetable.com/2010/04/14/want-to-raise-money-more-easily-clean-up-your-own-shite-first/comment-page-1/#comment-10500 Dave Broadwin Mon, 19 Apr 2010 01:55:28 +0000 http://www.bothsidesofthetable.com/?p=2407#comment-10500 Great post, I am just getting around to catching up on my reading. Looking at some of the comments around fiduciary duty, there is a conundrum here. On the one hand you very aptly point out many of the ills of participating preferred. On the other hand, you point out that you handle other people's money and feel a responsibility to protect on downside. I suppose you might point out that money (at least venture money) would be less available without the downside protection. But, as you point out, there is a cost (in lost returns from deals that don't get new money) stemming from the evils of participating preferreds. I can't imagine there is any way to quantify these lost returns. To take them into account, an investor would have to take a really long view of an investment, and the temptation to cover the downside compared to the speculative benefits of taking such a long view has to be overwhelming. Investment patterns are very unlikely to shift. For similar reasons, cleaning up your mess is not going to happen for most companies because they will be asking investors to give up a bird in the hand for some speculative future possible benefit (that they may not even participate in). Great post, I am just getting around to catching up on my reading. Looking at some of the comments around fiduciary duty, there is a conundrum here. On the one hand you very aptly point out many of the ills of participating preferred. On the other hand, you point out that you handle other people's money and feel a responsibility to protect on downside. I suppose you might point out that money (at least venture money) would be less available without the downside protection. But, as you point out, there is a cost (in lost returns from deals that don't get new money) stemming from the evils of participating preferreds. I can't imagine there is any way to quantify these lost returns. To take them into account, an investor would have to take a really long view of an investment, and the temptation to cover the downside compared to the speculative benefits of taking such a long view has to be overwhelming. Investment patterns are very unlikely to shift. For similar reasons, cleaning up your mess is not going to happen for most companies because they will be asking investors to give up a bird in the hand for some speculative future possible benefit (that they may not even participate in).

]]> http://www.bothsidesofthetable.com/2010/04/14/want-to-raise-money-more-easily-clean-up-your-own-shite-first/comment-page-1/#comment-6162 Dave Broadwin Mon, 19 Apr 2010 01:55:28 +0000 http://www.bothsidesofthetable.com/?p=2407#comment-6162 Great post, I am just getting around to catching up on my reading. Looking at some of the comments around fiduciary duty, there is a conundrum here. On the one hand you very aptly point out many of the ills of participating preferred. On the other hand, you point out that you handle other people's money and feel a responsibility to protect on downside. I suppose you might point out that money (at least venture money) would be less available without the downside protection. But, as you point out, there is a cost (in lost returns from deals that don't get new money) stemming from the evils of participating preferreds. I can't imagine there is any way to quantify these lost returns. To take them into account, an investor would have to take a really long view of an investment, and the temptation to cover the downside compared to the speculative benefits of taking such a long view has to be overwhelming. Investment patterns are very unlikely to shift. For similar reasons, cleaning up your mess is not going to happen for most companies because they will be asking investors to give up a bird in the hand for some speculative future possible benefit (that they may not even participate in). Great post, I am just getting around to catching up on my reading. Looking at some of the comments around fiduciary duty, there is a conundrum here. On the one hand you very aptly point out many of the ills of participating preferred. On the other hand, you point out that you handle other people's money and feel a responsibility to protect on downside. I suppose you might point out that money (at least venture money) would be less available without the downside protection. But, as you point out, there is a cost (in lost returns from deals that don't get new money) stemming from the evils of participating preferreds. I can't imagine there is any way to quantify these lost returns. To take them into account, an investor would have to take a really long view of an investment, and the temptation to cover the downside compared to the speculative benefits of taking such a long view has to be overwhelming. Investment patterns are very unlikely to shift. For similar reasons, cleaning up your mess is not going to happen for most companies because they will be asking investors to give up a bird in the hand for some speculative future possible benefit (that they may not even participate in).

]]> http://www.bothsidesofthetable.com/2010/04/14/want-to-raise-money-more-easily-clean-up-your-own-shite-first/comment-page-1/#comment-10501 Computer Liquidators Thu, 15 Apr 2010 23:56:02 +0000 http://www.bothsidesofthetable.com/?p=2407#comment-10501 Its a must to have your computers liquidated immediately after an upgrade or transfer of your business. My company had it right after we had an upgrade with the business and the computers. And when company's are falling into bankruptcy, liquidation is the best route to take. Its a must to have your computers liquidated immediately after an upgrade or transfer of your business. My company had it right after we had an upgrade with the business and the computers. And when company's are falling into bankruptcy, liquidation is the best route to take.

]]> http://www.bothsidesofthetable.com/2010/04/14/want-to-raise-money-more-easily-clean-up-your-own-shite-first/comment-page-1/#comment-6160 Computer Liquidators Thu, 15 Apr 2010 23:56:02 +0000 http://www.bothsidesofthetable.com/?p=2407#comment-6160 Its a must to have your computers liquidated immediately after an upgrade or transfer of your business. My company had it right after we had an upgrade with the business and the computers. And when company's are falling into bankruptcy, liquidation is the best route to take. Its a must to have your computers liquidated immediately after an upgrade or transfer of your business. My company had it right after we had an upgrade with the business and the computers. And when company's are falling into bankruptcy, liquidation is the best route to take.

]]> http://www.bothsidesofthetable.com/2010/04/14/want-to-raise-money-more-easily-clean-up-your-own-shite-first/comment-page-1/#comment-10502 Healy_Jones Thu, 15 Apr 2010 19:50:57 +0000 http://www.bothsidesofthetable.com/?p=2407#comment-10502 Mark, your four points are spot on. However, I do think it is very important for entrepreneurs to understand the implications of a clean up/down round. It's not as easy as just re-doing the capital structure - common holders (i.e. the founders, management and employees who own common) usually get crushed. I wrote a post on this a while ago; back when I was a VC I worked on a number of down rounds: <a href="http://www.startable.com/2009/08/11/venture-capital-down-round-anti-dilution-provisions/" rel="nofollow">http://www.startable.com/2009/08/11/venture-cap...</a> While VCs usually make efforts to "re-up" important people still working for the company, as an entrepreneur it is painful to basically lose vested equity you worked really hard for, and it hurts to think that founders who have left can get wiped out. Mark, your four points are spot on. However, I do think it is very important for entrepreneurs to understand the implications of a clean up/down round. It's not as easy as just re-doing the capital structure – common holders (i.e. the founders, management and employees who own common) usually get crushed. I wrote a post on this a while ago; back when I was a VC I worked on a number of down rounds: http://www.startable.com/2009/08/11/venture-cap… While VCs usually make efforts to “re-up” important people still working for the company, as an entrepreneur it is painful to basically lose vested equity you worked really hard for, and it hurts to think that founders who have left can get wiped out.

]]> http://www.bothsidesofthetable.com/2010/04/14/want-to-raise-money-more-easily-clean-up-your-own-shite-first/comment-page-1/#comment-6159 Healy_Jones Thu, 15 Apr 2010 19:50:57 +0000 http://www.bothsidesofthetable.com/?p=2407#comment-6159 Mark, your four points are spot on. However, I do think it is very important for entrepreneurs to understand the implications of a clean up/down round. It's not as easy as just re-doing the capital structure - common holders (i.e. the founders, management and employees who own common) usually get crushed. I wrote a post on this a while ago; back when I was a VC I worked on a number of down rounds: <a href="http://www.startable.com/2009/08/11/venture-capital-down-round-anti-dilution-provisions/" rel="nofollow">http://www.startable.com/2009/08/11/venture-cap...</a> While VCs usually make efforts to "re-up" important people still working for the company, as an entrepreneur it is painful to basically lose vested equity you worked really hard for, and it hurts to think that founders who have left can get wiped out. Mark, your four points are spot on. However, I do think it is very important for entrepreneurs to understand the implications of a clean up/down round. It's not as easy as just re-doing the capital structure – common holders (i.e. the founders, management and employees who own common) usually get crushed. I wrote a post on this a while ago; back when I was a VC I worked on a number of down rounds: http://www.startable.com/2009/08/11/venture-cap… While VCs usually make efforts to “re-up” important people still working for the company, as an entrepreneur it is painful to basically lose vested equity you worked really hard for, and it hurts to think that founders who have left can get wiped out.

]]> http://www.bothsidesofthetable.com/2010/04/14/want-to-raise-money-more-easily-clean-up-your-own-shite-first/comment-page-1/#comment-10503 iAinsley Thu, 15 Apr 2010 07:48:01 +0000 http://www.bothsidesofthetable.com/?p=2407#comment-10503 Double points for considering reputation and playing nice. Good post. Ainsley Double points for considering reputation and playing nice. Good post. Ainsley

]]> http://www.bothsidesofthetable.com/2010/04/14/want-to-raise-money-more-easily-clean-up-your-own-shite-first/comment-page-1/#comment-6158 iAinsley Thu, 15 Apr 2010 07:48:01 +0000 http://www.bothsidesofthetable.com/?p=2407#comment-6158 Double points for considering reputation and playing nice. Good post. Ainsley Double points for considering reputation and playing nice. Good post. Ainsley

]]> http://www.bothsidesofthetable.com/2010/04/14/want-to-raise-money-more-easily-clean-up-your-own-shite-first/comment-page-1/#comment-10504 mpstaton Thu, 15 Apr 2010 04:50:37 +0000 http://www.bothsidesofthetable.com/?p=2407#comment-10504 For Realz. Hairy situations and optics play into these things more than most people imagine..... For Realz. Hairy situations and optics play into these things more than most people imagine…..

]]> http://www.bothsidesofthetable.com/2010/04/14/want-to-raise-money-more-easily-clean-up-your-own-shite-first/comment-page-1/#comment-6157 mpstaton Thu, 15 Apr 2010 04:50:37 +0000 http://www.bothsidesofthetable.com/?p=2407#comment-6157 For Realz. Hairy situations and optics play into these things more than most people imagine..... For Realz. Hairy situations and optics play into these things more than most people imagine…..

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