> Whenever an investor says "are you really going to quibble over 1%?" my instinctive reaction is "are you?"
My reaction is even stronger: "Yes, I am. 1% to you is .02% of your fund--it's a rounding error. 1% to me is real money."
My reaction is even stronger: "Yes, I am. 1% to you is .02% of your fund--it's a rounding error. 1% to me is real money."
The VC is doing, give or take, the same deal 10-20x in a portfolio. If you talk about that 1% becoming a norm, then it really moves the dial 5-10% on the total return for the VC.
A founding team should be owning 60-80% of the company after that transaction. Meaning, the 1% ownership difference is something like 1.3% of the founders' total return.
If you're going to try to do math on it, be fair and real.
Full disclosure: VC here.
Founders are (or at least should be) optimizing for the fact that they are most likely to be a mediocre business that isn't going to cash out with a lottery ticket.
As far as what the VC is optimizing for -- fair enough, I am only pointing out that saying the 1 point difference in, say, a 10 or 11 point equity stake is somehow actually only 0.2% to the VC isn't fair. It's a 10% difference in the VC's stake.