Wow what a shitty article. This whole thing is killing pg's first comment in the thread yesterday<p><i>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</i><p>From an author who obviously <i>read that thread</i> she's completely ignoring what he said with crappy statements like this:<p><i>Considering this comes from a man who just asked his portfolio to blacklist an entire venture firm, this might read as a rather contradictory statement.</i>
How did this become such a big deal? Raising money, especially for the first time, is a stressful experience full of uncertainty. When we did it, one investor (not Google Ventures actually) low balled us and a lot of our peers. We were first timers and it freaked us out.<p>PG would have no problem with writing "avoid Google Ventures". He didn't because that's not what he meant. It's simply about saying hey I heard that Google Ventures lowballs, if they do it to you don't freak out.
For more discussion, see <a href="http://news.ycombinator.com/item?id=4486835" rel="nofollow">http://news.ycombinator.com/item?id=4486835</a> which was posted previously.<p>Here is a td;lr of this particular take on the topic.<p><i>Google Ventures' low valuations are justifiable for the same reason that YCombinator's low valuations are justifiable - in addition to the money they are providing a tremendous amount of support to the companies that they invest in, and the value of that is bigger than the dollar amount invested. However Paul Graham may be biased because Google Ventures is a reasonably direct competitor.</i><p>Most of that is reasonable. But my personal guess is that the final point of the article is entirely wrong. My personal guess is that Paul Graham is behind the scenes dealing with an unfortunate startup that ran into trouble due to the issue he's talking about, and thought it wise to warn others. Of course it is in nobody's interest for him to reveal which startup or the nature of their trouble. So we (hopefully) will never get the real story.
This article annoys me. Here seems to be the general structure:<p>* Generalize PG's statement until it is basically irrelevant to the point he was trying to make.<p>* Fill in a whole article speculating about the generalized interpretation of PG's comments.<p>* Say what PG actually meant in the end without showing any indication that the author actually understood what he was talking about.<p>* Paste a badly edited "primer" trying to explain the argument because the author obviously doesn't get it.
<i>But in talking with a slew of Y Combinator alumni from the past three years of YC batches, we found that Graham himself takes between 5 percent and 7 percent of companies for amounts ranging between $12,000 and $20,000. Those amounts aren’t any great secret; YC publishes approximations on its own site. But while the founders said YC insisted that these terms had nothing to do with their companies’ actual valuations, on paper, it made the startups worth between $228,000 and $287,000 on the high end.</i><p>This is based on the faulty assumption that $12-20k is all you get for getting into YC.
Wow, the hate.<p>I don't know whether the author (or VB) has a beef with YC, but it sure looks so here. (I'm not running a startup nor am I especially into SV soap opera, but this piece speaks for itself).
In regards to the company complaining about pg's "valuation", if they felt they were far enough along to raise a priced round of funding, then why didn't they do that instead? Companies don't enter an incubator for the funding, so comparing that to true valuations is ridiculous. This is just a poor attempt at trolling YC and pg.
<i>"he’s trying to keep his money-makers from defecting to a competitor."</i><p>This makes no sense. It was a private email to existing YC companies. YC has already make their investment, there's no "defecting" to be done.
>> Both entities are here to make money from the labor and success of entrepreneurs, essentially operating in a predatory role.<p>What is this person doing writing for Venturebeat?
> The kicker, and the truly poetic part of all this, is, as Graham hints, that all these valuations are made up, anyhow.<p>Of course they're made up, everybody knows they're made up. They are a response to market demand to invest in companies at that stage (especially ones that come out of YC). The same is true of companies entering Series A, IPOing, or publicly available.<p>I'm surprised at VentureBeat's reporting here. If you're experts in "Venture", I would expect you to know that valuations are always made up, without needing PG to hint it for you.
Is it just me or does this author have an affiliation with TechStars? (For instance: see <a href="http://vimeo.com/5346690" rel="nofollow">http://vimeo.com/5346690</a>)
This seems to have just gotten out of hand. How did this memo get "leaked" anyway? I don't think article is as negative as others are stating but it seems unnecessary.