There are two main types of liquidation preferences. First Participating vs. Non-Participating. Best for us (VCs) (worse for founders): Participating Preferred (i.e. VCs get our liquidation preferences PLUS we "double dip" and share pro-rate in anything above). Non-participating means basically that we take our pick: either the Liquidation Preference (usually amount VCs invested, sometimes though 2x or 3x etc.) or share pro-rate as if we had converted to common. So we take our pick of the higher amount
Participating Preferred: We get best of both worlds.
Of course, for a VC investing in an early round, it's actually often more in the VC's long-term interests to take entrepreneur friendly terms, since later rounds are never less favorable to entrepreneurs and previous investors than previous rounds.
So, if you go in at 2-3x PP in the A, you're basically dooming yourself to even higher multiples in future financings. I guess you could pro-rata, but still, the A tends to be significant.
The Series A USV invested in was only $775,000 and was at $1/share according to privco and confirmed by docs I've seen. So how much did USV invest? Obviously Tumblr sold for over $200/share, so please do the math and show what's off? Is it a few percent, in which case what does that matter when you've made 5,000%? You should be proud of that! As a VC I'm envious Fred.
But I've found the privco data reliable (but I'm a client), so I respectfully disagree with just throwing out ad-hominem attacks. So they called out your bad bed on Foursquare. (Foursquare was just forced to borrow $41 Million and even you blogged it would be massively dilutive. PrivCo said forusquare will be out of business by year's end absent raising "massively dilutive" funding.
So I respect you, I respect PrivCo from my working with their remarkably accurate data. You shouldn't take it personally, congrats on today, and if there's something we should all know and you DIDN'T do that well, well I guess tell us. If you did even better, tell all of us on HN and even more kudos! Just don't throw out attacks though something's "wrong" when it can be wrong by a penny or by alot and either way you're technically not lying...it's beneath you and USV and us VCs, c'mon you're better than that.)
Again hats off if you did even close to what's been reported on your Tumblr preferreds.
SiliconValleyVC - this account has to be the worst attempt at astro-turfing I've seen in a while from a company employee or founder. Does anyone talk like this about a vendor (much less a data company) -- "I respect PrivCo from my working with their remarkably accurate data." Right right.
You're a SiliconValleyVC whose submission history is 2 privco articles. And your comment history references PrivCo multiple times and your love of them.
So perhaps you're just a really really happy VC client of a data tool or more likely you are here at the behest of your employer/are with the company and trying to salvage what must be a very bad day at the office - data company whose data gets called garbage.
On to your points to Fred:
1. If you've seen the docs, share them.
2. There was no ad-hominem attack. Fred called your data b.s. He has the #s so is in a good position to make that claim.
I can understand you're trying to save face for Privco after respected VC's Fred Wilson, Bijan Sabet have called you out. Plus, today, editors of 3 major tech publications called you out -- Jay Yarrow of Biz Insider, Eric Eldon of TechCrunch and Mike Isaac at AllThingsD all said Privco data and claims are incorrect and hyperbolic.
Pls don't insult us here with this very sad attempt at covering for your employer/company.
I take it personally when people write irresponsible garbage about our portfolio companies. I care about them and their teams a lot. Making money is nice but being a supportive and good investor is a lot better
To me, you are the first actual investor that has said something like this. My image of investors in general is tarnished from past dealings. Yet, I want to believe. I want to believe that there are investors out there who simply care about the people, about the goals. Who do not see an investment as merely a financial transaction, but as an addition to their own team. If this is really you, then congratulations. Its good to have people like you in the mess that is tech and SV.
Disclaimer: I don't need, nor am I looking for any kind of funding. These are sincere words.
Most of the top tier investors are pretty consistent with this message. Ironically, they're also the ones who get approximately all the returns, probably as much because the best entrepreneurs would prefer to work with them vs. mediocre investors, as much as because of the direct value these investors add.
it is easier to behave properly when you have a big pile of chips in front of you. when you don't have any chips, it is tougher. that's why the best get better and the worst get worse.
Given how much people talk, you'd think that when the pile is small is when you need to be all the more careful about how you treat people if you want that to ever change...
For my part I have an mental list of both vc's I'd love to work with again, and VC's I not only will never, ever take anything from again even if it's just a free pen, and while I won't badmouth them publicly, there are certainly some I like to think I will slide just a little bit quicker into obscurity thanks to the odd situations where their name might have come up in conversation..
I generally don't design or build with outside investment in mind. Given how I've seen how bad investors make good teams crumble in short periods of time. But, I would actually consider working with people who see value in me and my team, rather than only focus on the bottom line. May you mention other investors who share this same attitude?
It's easiest at the seed stage; Y Combinator for sure, and from what I've heard, a lot of people like 500 Startups and some well-known individual angels (but differ by sector).
Probably non-existent at the PE stage.
It also varies within firms -- it's down to the individual partner -- but the overall firm matters too (or else "your" partner gets blocked on doing helpful things).
The best strategy, IMO, is to get an early investor on your side who shares a lot of the same goals (e.g. YC), and then work with the early investor to find later stage investors who are compatible.
(There's one specific firm and one specific partner I really like, but I haven't taken investment from them, so I'm reluctant to name. I get better advice from him/them already than I'd expect from an actual investor, though.)
there are many of us in VC who approach things this way. they are the ones we like to work with the most. if you look at who we work with often, you can reverse engineer the list.
Fred,
I can definitely say that you and several others in the VC world deeply care about your teams and your vision for the world. I have been a part of your community @ avc.com for awhile, I started following you and Brad Feld after I met Brad when he came to Oklahoma City. Both you and he are super genuine, open, and I see time and time again how you go to bat for your entrepreneurs. I think what makes a good investor is someone who takes true ownership of an investment, and does what they can to help it succeed. You definitely fit that bill, but there are plenty of others out there as well.
My advice to everyone looking for people like Fred is to reach out to other entrepreneur's and see who has really been helpful, follow them on their blogs or twitter, and try and figure out what they are about. If you like what you see, engage them and the community of people around them. Maybe you will never get to work with them directly, but in the process most likely you will connect with other like minded individuals and will find people who are either in the same position as you or sages who have done it multiple times before. Maybe you will get lucky and find a few life long friends. And that is what makes it all worth it, isn't it?
Fred is probably the most dog-fooding VC I have ever seen. Before the redesign of his blog, the site was crawling with scripts and other stuff from the companies he had invested in.
The AirBnB model is tricky. I've had friends wire $7,000 for New Year's Eve house last weekend, then "owner" disappeared. Apparently did it to 10 other renters for same non-existent house. AirBnB refused to honor any guarantee (some technical terms of use). But I know I'd rather book a hotel. Caveat that I know other friends who love it. But seems too risky for me.
Anyone else on here been offered an "acq-hire" (ditch your startup, tech team heads off to the buyer in exchange for signing bonuses and equity?) Did you take it?
Tesla at least applied for and got loan with a WORKING CAR and CUSTOMER PREPAID ORDERS. Fisker had a 50-page BUSINESS PLAN. Tesla is NOT Fisker. Doesn't mean Tesla will succeed- current Tesla model car has some engineering issues clearly. But Tesla's not Fisker. Fisker loan was negligence, and DOE never saying a word to the public (same with Solyndra) until finally a Bankruptcy filing exposed it all: loan extensions, waivers etc to keep it quiet. That's absured...this is OUR MONEY being loaned out.
As a VC just want to point out to tech entrepreneurs (and I was one before) that whether a VC funds you ("blesses you") or not does NOT mean your idea or you and your team are worthless. Hang in there and try to achieve as many milestones as possible with as little money as possible. And it's never been more possible to do so cheaply as it is today.
Won't repeat prior post but I personally recommend not relying on crunchbase and paying for either PrivCo or DowJones VentureSource. They verify everything and as a wise man said nothing worse than no information except having bad information and thinking it's correct.
http://www.dowjonesventuresource.comhttp://www.privco.com/investors
As a VC in Silicon Valley I have tremendous respect for the Valley, but I must say (having formerly lived in LA) it sometimes feels like a 1 industry town. In L.A. every and his brother "had a screenplay." "Oh man, can you read my screen play? We're looking to raise a million for this indie film." In Silicon Valley say you're a VC and my lord the way people change, from talking to you casually to looking at you like an addict and you're a bag of heroine they desperately need.
Startups CAN actually survive and meet early milestones without us VCs you know. In Canada I'll bet it would be refreshing to "have" to meet those early milestones without being made to feel like a failure just because you're not already "funded." "Are you funded? Yeah, by who?" "You're not funded? Oh bummer." (Person walks away.)
So eventually a Canadian entrepreneur may need/want to move to Silicon Valley, but I'll bet they learn alot - and find it alot more refreshing - to start out at first without the non stop "you got a screenplay? you got an agent?" equivalent I see and hear every day and every hour in Silicon Valley.
Absolutely agree (I wrote the post). It's amazed me (but not shocked me) to see so much of the commentary focus on the state (or lack thereof) of VC in Canada. VC can be a means to an end. But it certainly isn't the end ...
In my experience, if you want reliable info (NOT Crunchbase nor companies who just crawl/spider them and resell it to you, you know who you are right below) use PrivCo, what I use in VC. It's reliable, confirmed with the VC firms and the startup founders. Rarely find anything off (crunchbase if way off as all the HN crew already has figured out).
Just do a search for VC firms and specify what date YOU want their last investment to be...everyone has different critera. If you think if it's been more than 6 months it's a "zombie VC" (I personally disagree, because without getting technical depends on age of the fund...a new 10-year fund invests most of its money in the first 2 years in a nutshell) then pick 6 months on PrivCo VC firm search for last investment. If you think it's 12 months search for 12 months. 18 months, search for that. Don't go by this nonsense list with arbitrary 13 month "cutoff", especially when many of these deals aren't announced - so they do have deals as evidenced from fellow HN crew discussion below missing, so the "no deal in 13 months" is wrong to begin with - you need a dedicated firm like PrivCo (or DowJones VentureSource) to diligently find those deals day after day. Just 1 missing VC deal for a firm throws off the entire "13 month zero deals" input there = output worthless.
Long way of saying search for venture capital firms in my humble opinion using PrivCo and the search criteria: last investment must be within X months, plus must have made investments in the precise sector you want, etc. Then you get the results, export to Excel, and it even has updated names and direct emails of the partners. It's a beauty. Might be others I haven't used too but this is what I personally use:
http://www.privco.com/investors
Participating Preferred: We get best of both worlds.