New comment by Anonymous314 in "The Equity Equation"

Anonymous314 — Fri, 20 Jul 2007 15:00:54 +0000

I think I was unnecessarily unclear - let's say we're talking about buying eggs. Suppose I'm willing to pay up to $3 for a dozen. That doesn't mean that I should buy them if I find eggs for $2.99 - I should keep shopping around, because grocers can profitably sell eggs for $2 a dozen, so I'm bound to find eggs closer to the $2 mark. I need to take into account what would be reasonable for the other party when deciding if a deal is reasonable, not just the limits of what would be reasonable for me. If I'm stuck, and everyone is selling eggs for $3 a dozen, then it matters whether that's beyond my personal threshold or not. If I only note how close a deal is to my personal threshold, without noting whether the other party would be likely to agree to a more favorable deal, I'm liable to get ripped off, unless I have no leverage for negotiating anyway, and I can only take it or leave it.

New comment by Anonymous314 in "The Equity Equation"

Anonymous314 — Thu, 19 Jul 2007 05:15:28 +0000

The article ignores how market prices work - the formula presented lets you know the maximum equity you can give up and still get a positive return by doing so, but incorrectly explains why VCs accept much less - the minimum equity a VC can accept and still expect a positive return on their investment can be far lower than the maximum the startup can afford to give profitably. The VCs are subject to competition with other VCs, so in such cases they cannot force the startup to accept a just-better-than-breakeven deal.

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New comment by Anonymous314 in "The Equity Equation"

New comment by Anonymous314 in "The Equity Equation"