Selling below total capital raised leaves founders with zero exit payout
Pablo Srugo · Why you shouldn't chase unicorns; 3 Big VC Myths; and how to keep control of your startup · PMF Show · Mar 8, 2024 · at 13:59
Pablo Srugo, VC and host of The PMF Show, explains the downside risk of liquidation preferences when early-stage startups raise more venture capital than their ultimate exit valuation.
0:00 / 0:25exact quote · 25.2s
▶ Watch the full episode on YouTube → 720p mp4 · rendered on demand · StarZero watermark
“And I've seen so many companies, especially in the last few years that raised more money than they're worth. And so now the founders find themselves in a position where they sold their company, which has revenue, which has growth, which has a real product that they could sell it to be clear. Like it's got real value, but if they sold it, they would get less money than they raised. 100% of the money It would come in from that exit would go to the investors and the founders will get left with zero.”
quote is from the automated transcript, cleaned for reading: filler sounds and stutters are removed, nothing is rephrased. names can be misheard (the analysis reads context, assessments check outside sources). how →
More from Pablo Srugo
Srugo: Ignore Advice to Work On Your Business Instead of In It
“It's almost like, you know, they tell you shouldn't be working in the business. You should be working on the business. And I'm like, no, you should be working in the business as long as humanly possible. You should do whatever's the hardest thing to do that yo…”
Srugo: Intros from VCs who passed destroy fundraising momentum
“If I, as a VC, make an intro to another VC, the first question they're going to ask me is, are you investing? And if I say no, I've just deflated that balloon completely. So the last person that you want to intro you to other VCs Is a VC.”
Srugo: Time-in-Market Moats Do Not Exist for AI Startups
“All the models just constantly get better and a new entrant coming in today can probably out of the box, have a product that is equally as good as yours. And so your time in market mode, frankly, doesn't exist.”
Srugo: AI-First Service Providers Scale GTM Faster Than Selling AI SaaS
“Instead of what he chose to do it is no, no, no, I'm just going to become an MSP, but I'm going to become an AI first, highly scalable MSP. I won't have the same margins as if I was purely selling AI, but the speed of go to market is going to be orders and ord…”
Srugo: Seed investing risk shifted from product value to competitive defensibility
“Pre-gen AI, the biggest thing was as a seed stage investor, is this real value creation? Like, is this a nice to have versus a must have? That was the big question for most companies that came to pitch... These days, the reality is AI has put founders in a pla…”
Srugo: A $5M to $10M business does not require true PMF
“Product market fit is the thing that's going to give you the venture type growth, right? The truly exponential, hard to control growth that puts you on a path to like a hundred million plus in revenue. If you want to build like a five to ten million dollar bus…”