Tips for Startup Companies (2006)

I read a lot of articles on startups, and the take away is usually a few small nuggets of value. I think this is first article I have read in a while that has a lot of value. It was good. Read it.

"Your competitors can probably get a home equity loan at 6 percent on their McMansions. How much cheaper can your cost of capital possibly be?"<p>Oh sweet blast from the past.

<i>A less obvious approach is to insist that the venture capitalists buy some of your common shares at the time of the investment. There are a lot of venture capitalists and not too many good companies. If your company is attractive, you can probably find a firm that will agree to put $10 million into the company and, say, $3 million into your pocket. Then if the enterprise stumbles and ends up being sold for, say, $9 million, you won't feel like a total idiot. </i><p>Is this still the case? Are VCs willing to do deals like this (especially early on, say in a Series A round)?

The bit about preferring hypothetical questions over past achievements in interviews sounds dubious to me. The current practice seems to be "behavioral" questions like "tell me about a time you had to deal with &#60;specific type of problem x&#62;, and how you personally contributed to solving it", the idea apparently being that what someone <i>claims</i> (or imagines) they would do in a given situation is a much weaker indicator of their realistic future behaviour than what they actually <i>did</i> in that situation in the past. In other words, actions speak louder than words. However, this is different than simply letting someone brag in general terms about some project they were a part of - the more specific nature of the questioning allows you to get at what the person's real contribution was.<p>I haven't seen the actual research though (I think behavioral interviewing at least claims to be based on research evidence).

I'm curious about the participation rights -- is there any chance to avoid this altogether? Basically, this means that all that the company gets from the VC is a loan, in return for a part of the company. I'm still far from needing a VC, but at the moment I don't see myself allowing this clause.