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Comment by kubrick | Hacker News Reader

Two thoughts come to mind:

1) the VC system needs to be reformed. If founders are being screwed like this (and I think it's reasonable to say this is a screw), they're going to find other ways to raise capital. (And they are!) VCs should be in the business of cultivating founders, of encouraging and then rewarding them.

2) This is all the more reason to sell your company; it's more realistic (post-dot-com-bust) anyway, and obviously, it's the way to profit the most. Plenty of companies are buying these days. You just have to find a way to make something worth buying (and that's the rub, isn't it?).

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I'm not sure how founders are being screwed here. They are asking for (in most cases) millions of dollars to develop a likely unproven idea. Also, VC's are not in the business of coddling founders. They are making an investment that they hope will return a profit and that is what is expected by their investors. Places like YC try to cultivate and encourage the founders, but they only give you ~$10000. If you want a couple million then you have to be willing to play the game.

You are right in the fact that new startups should be looking at new and innovative ways to fund themselves and I hope that people take that point away from reading articles like this.

They're being screwed: after developing a workable idea and putting years of work into it, they come away with practically nothing. If that's "the game" then no wonder founders are turning away from VCs. That's why I'm suggesting VCs change. Stop short-changing the founders. VCs with no founders are not VCs.

10% of a million dollar company isn't practically nothing.

It's not much when you a) have to split it 2 or 3 ways, and b) have to watch the VCs take home several times as much, when you did all the work.

My point is that there is a value judgement here. VCs are being overvalued, and founders are being undervalued. This serves to demoralize and demotivate the founders, ultimately hurting the value of the company. It doesn't need to be that way.

They are asking for (in most cases) millions of dollars to develop a likely unproven idea.

They're asking for money that can potentially make the VCs very, very rich. Or at least make a good return on investment. The VCs are choosing to make that investment. They're not just being asked; they're answering in the affirmative, at which point they ought to be working in all parties' best interest.

VC's are not in the business of coddling founders.

I think you're making this guy's point. That is the problem. They should be in that business; they'd be helping themselves.

Judging by the number of up-votes, I wonder how many VCs lurk here. They can't be PG fans, considering what PG has had to say about VCs:

http://www.paulgraham.com/venturecapital.html

If you just glance at the numbers it looks like they're being screwed. But at each round (while they still had control) the founders got to decide if taking funding would be better for the company and themselves.

There's no rule that says founders get to keep large percentages of their companies.

My point is that it doesn't have to be that way. The VCs are behaving in a predatory way, and they don't need to. I've worked at such a startup, and taking funding isn't just a nice option; usually it's a matter of survival. Of course a VC firm is going to take advantage of that fact. But if they showed a little more character by not sucking up such giant gobs of the companies, the founders would be encouraged to stick around and maximize the company's value. Instead, they're just encouraged to get what they can and then get out.

thing is, you should put the value of money in a more important position. If you are looking for fund, that means your "business" here need more money to start or level up otherwise you can self-fund. Under that circumstance, without the money, you can achieve nothing. To find VC for funding is a fair game in the end (despite somehow the connection plays an important role here). It is a open market, you need money, and they take shares. A business is a business not an idea because someone has to do it and someone actually fund it.

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