Hacker News Reader

Comment by Jasper_ | Hacker News Reader

The investors would prefer to lose their money entirely than get it repaid over a longer period of time?

There is a significant time value of money effect at play here - better to get the tax advantages from writing the investment off in Year 5 than getting paid back in Year 12

They can always sell the shares back for a dollar and do the write off whenever they want.

If someone wants to buy the shares... even if the company is running well, if the founder has 51%, they might have no incentive to buyback.

Is there a founder in the world of a company that's running well who wouldn't buy back 49% (or 9% or 79%) of their shares for a dollar per investor?

Exactly. And if in 2-3 years the company is doing spectacularly well it’s now additional headroom to raise without losing control.

Heck, it's worth more than a dollar to not have to send an investor update or answer a resulting question.

Yes. All their returns come from 1-3 companies, while the other 40 board seats are a headache (founder squabbles, helping to hire a VP of Sales, etc)

I’ve been in a VC fund for 10 years and literally all the returns are from three companies, the others make no difference whether they zero out for return 3x

If an investor bet on a founder that they could produce billion dollar returns in a 10 year time span for their investment, they would much rather have the founder work on another idea / direction that could potentially result in the crazy returns.

You can never reach that level returns if a business is sitting at 50k/mo.

Then sell the business for a reasonable multiple, don’t shut it down.

I actually think so, because of how the vc funds and balance sheets are structured. The only thing they care about is the one or two startups that will return the entire fund.

Yes, or more specifically, Venture Capitals would.

Reply on news.ycombinator.com