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Scott Rafer

"Long-term shareholder value," isn't specific enough. The clarifications you make get you most of the way there, but all the way. LT Value can either be CA$H which you can invest however you wish, or public equity where you have a lot of liquid paper wealth but haven't diversified (talk to Bear, Stearns and Lehman execs about that). My bias is for cash money, clearly.

Just as critical, I'd phrase it as LT Value for *current shareholders.* You might find that to be implicit, but first timers often do not.

With super, super VC deal terms, the expected value (probability * outcome) of raising money probably comes out close to even. However, it's a handful of people that can get those terms consistently over time from institutional investors. Neither you nor I are currently anywhere near that list, never mind rookies. Once LiqPrefs, Participation or Pro Rata investment rights enter the equation, game theory analysis starts becoming required to value the Common, i.e. the Common is hosed from a risk-return perspective.

To turn the bad VC baseball metaphors back on their originators -- base hits win ballgames.

Jordan Mitchell

Thx for the comment, Scott. Yeah, just a general line of thinking clearly -- not specific.

I just think it's interesting to consider that:
-- huge VC financings may now be just as at risk for a low shareholder return, as smaller angel financings.
-- many who raised money on a "swing for the fences" game plan are now all about the base hit.

Neal Richter

I'll leave the financing question to the $$ gurus, however here are a few pertinent baseball facts:

Ted William's on base percentage is 48%, slugging percentage is 63% and 23% of the time he crossed home plate.

Hank Arron's on base percentage is 37%, slugging percentage is 56% and 17% of the time he crossed home plate.

Yet both players hit home runs on 6% of their at bats. So my take away is that being an opportunistic hitter leads to more contact with the ball (revenue) and more runs.

Dave Hardwick

I think your analogy is wrong, because it neglects the current economic conditions.

A better baseball example would be:
- Each season, MLB changes several conditions of play. For this season, the following conditions apply:
1) The ball is 1/2 the size of the previous season's and is black, not white.
2) The side of a diamond is now 180 feet, an increase from 90 feet that we now use.
3) The pitcher's mound is set at 45 feet from home plate.
4) Nobody is allowed to wear spikes, or other traction-improving shoes.

Now, go play ball.

Next year, we'll introduce new conditions!

Bottom line, there are a lot of great ideas out there, and now is probably not a good time for many of them. But, there are probably other ideas that are that wouldn't have been 3 years ago.

Interesting times...

Bill Harding

Great post! As the operator of a site that is "swinging for the fences" and "focusing on first base" (i.e., bootstrapping a market opportunity of > $100M (company=Bonanzle)), I often ask myself whether we should be looking for investment. To this point, my conclusion has been that so long as we continue to become increasingly profitable, eventually the investment community will notice us, and eventually they will make a deal that is sufficiently in our favor that it makes sense to take.

Of course, that is predicated on not having one of the missteps you allude to above, which is difficult when bootstrapping without flawless execution.

What it boils down to as I see it is that right now seems to be an almost unprecedentedly bad time to seek investment, both in terms of the deal one will get, and in terms of the amount of time it takes to find that bad deal. Since every other company faces these same challenges, I think that this is a safer environment than most to bootstrap in, since our competitors are less likely to become funded as well.

But "the window" you allude to does make me a bit edgy...

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