Comments on: The Price of Money: Say no, no, no – till your tongue bleeds

By: Niche Marketing Man

Niche Marketing Man — Wed, 18 Nov 2009 18:34:30 +0000

Exactly what I was thinking, I completely agree!

By: dasein

dasein — Fri, 06 Nov 2009 15:15:41 +0000

Richard’s thoughts and insight add considerable value to TC, and it is the occasional gem like this that keeps me returning to TC.

If there were posts like this two or three times a week, I’d pay a subscription fee. Forget the ads, which I block anyway and can’t see.

Go for subscription content that one can’t find elsewhere.

And it certainly makes up for the fluff like yesterday’s revew of Apple’s $20 remote control…

By: Doug

Doug — Thu, 05 Nov 2009 06:36:03 +0000

Not that dragons den represented the opposite of what I’m saying now. When two or more dragons competed over a deal, the likelihood of the entrepreneur receiving a fair deal went up tremendously.
Whether it was DD or not its always the entrepreneurs responsibility to put a price on their stock.

As for why you should trust me, that’s a choice you make each time you listen to someone’s advice. If you want to know more about my views you can read them over on my blog on the schoolforstartups site

By: Pete Shaw

Pete Shaw — Wed, 04 Nov 2009 19:13:21 +0000

So you’re saying that the ideal way to value a company is the exact opposite of what you signed up to with Dragon’s Den?

In Dragon’s Den you get the unwitting entrepreneur to value their own company, then (if the entrepreneur is lucky) fight it out over the stake you’d take, even if you knew it was really undervalued.

Why should we trust you now?

By: Tim

Tim — Wed, 04 Nov 2009 14:02:11 +0000

This is 100% true. Thanks for the nice piece of writing!

By: Doug

Doug — Wed, 04 Nov 2009 14:02:00 +0000

Stefano,
You are certainly correct that there are risk taking VCs in the world and in their absence we would have had a tremendous capital gap. But Banks, however unpleasant an experience with them may be, do not make enough money on their money to be providing high risk capital.
More to the point, I am not at all against VCs; I am against the notion that “fairness” ever plays a role. I find that when there are two parties of very unequal power in a transaction then there is little or no chance of a reasonable deal being struck, despite that fact that it is probably in the more powerful party’s interest to show restraint.
I will be writing about that in my next article in the series, The Price of Money.

By: Stefano

Stefano — Wed, 04 Nov 2009 12:21:47 +0000

I’m an entrepreneur too, but I think VCs deserve a little extra credit. Have you ever tried to get a loan from your bank to fund your business idea… well I guess this doesn’t need to get nastier.
Silicon Valley owes its very same existence to VCs that took risks to fund all those geeks popping out from Stanford back in the 70s. Look at Europe, we have no venture capital “tradition” and we have no startup culture.
Business is not for the faint of heart and I think is naive to expect 100% fair behaviors or that opportunities will always knock at your door if you’re a good guy.
Given this I certainly agree with the benefits of having to compete with each other as this simply reverse the power balance (they want you more than you want one of them).

By: Thierry

Thierry — Wed, 04 Nov 2009 10:49:17 +0000

Thanks for the nice post.
Interesting. I would teend to say ‘[at last] a post that is with an small entrepreners feelings …

Many new entrepreners like me are focused and the product and just are so naive when it comes to getting fuel/money for their business.

————————
I have one personnal true example. From Paris.

Last year I had 4 interviews with one guy from a parisian VC.
In 11 month. I would call him anytime I had a better product. And he would know me a bit. and give marketing advice. He was fairly good at business things.

On the 5th interview, nearly one year afterwards, my product was getting mature. He looked at me suddendly and made me a straight offer :
- “I like what you are doing, I take 10% for 10 000 €uros”.
[One must know thet in Paris one free-lancer starts at 5000 € / month ].
- I was both happy because someone made me an offer (an offer … you feel like it’s at last a reyward for your hard work ), but also a bit puzzled by that low price.
I mean 10Kilo-€uro could only get me perhaps 4 or 6 month running, and I could not even hire someone else.

I had no other VC to conter-offer this. So I was lets alone with this offer.
Everybody from my friends -who are absolubly not in this arrea- told me to go for this offer.
I hesitated a lot. I almost accepted.
Then I finnally refused at this price and told him I would go for 20K.
And the guy (he was otherwise fairly nice guy) did not make a conter proposition.

Conclusion : I think that my personal case just shows how important Doug’s advice is :

==> I am fairly sure that if I have had at that time also other interviews from another VC, one them would have accepted the 20K€ deal.