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0 pointsmorgante10y ago0 comments

> The problem being, how many of these businesses would have won any market share without early VC investment enabling the companies to dump money into customer acquisition at a loss?

The problem isn't with early VC money. Dropbox's early backers would have still made a gigantic return on Dropbox setting at a $1bn valuation.

Really, it's not even a problem with their series B ($250M at $4bn). $4bn is a reasonable eventual valuation for Dropbox.

The problem is that they didn't stop there. They raised another $850M in 2014 (in two rounds), which was basically sold on the promise of it being necessary to "win" the storage wars and acquire a monopoly.

By 2014, Dropbox was already a stable company with hundreds of millions in revenue. The only reason to raise money was to shoot for hitting Google/Facebook status (owning a lucrative monopoly). If they had instead accepted that their eventual outcome was a $3-5bn software company, everyone could have won: employees, investors, founders, etc. (Atlassian is an example of a company which did eventually raise substantial VC, but instead of gunning for a monopoly IPOed at a $4bn valuation.)

The problem is that founders ultimately have huge egos and want to be the next Mark Zuckerberg or Larry Page: commanding monopolies so lucrative that they can spend billions on zero-return "cool nerd shit."

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sharkweek10y ago

There has been a major shift as of late where IPOing at those mid-late rounds just isn't the trend anymore. Public markets are a cruel beast where companies are living and dying by quarterly reporting so these skyrocketing growth startups have less incentive to let the public judge them. They also don't want to leave too much growth opportunity on the table when going public anymore.

So it makes sense why companies would want to stay private if someone is willing to give them the cash they think they need. Problem is, those investors also want to make a huge return, so a 20B valuation is going to come with some nasty liquidation preferences/ratchets etc. to protect the money.

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