Just so everyone understands, I was not saying that Google Ventures is a bad investor and should be avoided. If we thought that, the email would have been a lot shorter. I was just talking about a structural problem that happens when you've already raised some money on a convertible note with a valuation cap, and an investor offers to invest at a lower cap.<p>That sort of offer puts founders in a bind, because if you take it (a) it can anger the earlier investors, and (b) perhaps worse, it can, like a "down round" give investors the impression that your prospects are getting worse.<p>My overall advice about fundraising is to do breadth-first search weighted by expected value. I.e. talk to every investor who's interested but focus on the most promising ones. This is one of many situations whose solution follows from that rule. An investor offering you money on worse terms is at least offering you money, which is better than nothing. But all other things being equal, the expected value of such an investor is lower than that of one willing to invest on the same terms as your existing investors, so you have any of the latter you should focus on them.
I don't know if this is true or isn't true, but Google Ventures' counter arguments are red herrings:<p><pre><code> "I don't know what Paul's thinking," Maris said.
"It's just not true. Our portfolio speaks for itself."
</code></pre>
and<p><pre><code> "We've already closed investments on companies from this class,
so they don't seem to feel that way," Maris said.
</code></pre>
Neither of those things mean that what PG is saying is false. Google Ventures is a desirable investor and entrepreneurs would be willing to trade lower caps for a Google stamp of approval on their round. The question is whether it's a matter of their policy to quote a cap at half of a company's existing one, and whether that is an ethical policy. Because they are skirting the question, it certainly makes them look guilty to me.
I don't think the problem here is with Google Ventures. The problem is that founders don't understand convertible notes with caps. More by Mark Suster here: <a href="http://www.bothsidesofthetable.com/2012/09/05/the-truth-about-convertible-debt-at-startups-and-the-hidden-terms-you-didnt-understand/" rel="nofollow">http://www.bothsidesofthetable.com/2012/09/05/the-truth-abou...</a>
Coincidentally, I was just reading this rather insightful essay on press releases
<a href="http://paulgraham.com/submarine.html" rel="nofollow">http://paulgraham.com/submarine.html</a> yesterday, and remember a line that stood out:<p><i>>'why he's writing about this subject at all.'</i><p>Makes one wonder what PG today, would say in response to PG (2005) :p
Source link <a href="http://www.businessinsider.com/paul-graham-y-combinator-google-ventures-lowball-offers-2012-9" rel="nofollow">http://www.businessinsider.com/paul-graham-y-combinator-goog...</a>
The warning:<p>"According to the website, the incubator's prominent founder said: "If you're talking to Google Ventures you may be part of a pattern. The pattern is: you've already raised some money at a cap of $x. Then GV says they're interested and wants to invest at a cap of $x/2.""
I'm a bit confused. Is the Google Ventures dig referring to companies that have already raised seed money from GV, and then try to get series A from them? Or is GV just doing this across the board for all startups that have raised seed rounds using convertible notes?
One of the worst mobile website I've ever seen. I can scroll down on the article, so I click "go to full site". That takes me back to the main page, which is annoying, but I manage to click back to the article, at which point I am put through to the article on the mobile site again. And that's on top of the fact that I have to view a loading throbbler for a text article. Chrome for Android and the Android Browser
Meta: the Inc.com mobile website offers an horrible experience on my Desire w/ ICS + Chrome. Slow, cluttered and buggy (wouldn't let me scroll to the bottom, kept bouncing back).<p>It's text content. Why not just a nice simple HTML page: instead of all the 'HTML app' cruft on top?
I'm sure this is both true and reasonable for some companies that did notes with absurdly high caps earlier (which many have) and are now raising more money. Nothing to see here.
If Google are willing to invest in your startup then why the hell would you turn that down?, it's like turning down a BJ from a supermodel, because she demands you do it at her house.
It seems pretty hypocritical to be warning people "don't let google rip you off with lowball offers" when you run a company whose business model is "rip off college kids by taking a huge stake in their company in exchange for nothing". Wouldn't "dear google, please don't out-compete us in the ripping off college kids game" have been more honest?