It also goes to the heart of how messed up our economic system can be. I can be mollified by saying that he worked hard and earned his ~$4 million by building a business. But I can't internally justify the VCs gifting him $800k for AFAICT nothing. I'm going to have to work for the next 4-5 years for that but he gets it basically on the whim of some person at a VC.
For a fund to realize that the company can live on, even if it's not the 10-100x they were hoping for, shows class. Listen, it's not curing cancer - but, it shows a level of maturity and understand that we should praise and not take for granted.
The way that fund economics work, they can write off a lot of small bets. However, the way that partnerships work, there are big egos at play. It's a dirty game, but when people do the right thing, it's worth praising.
Because if we set the bar at curing cancer (not that that's what you were doing my friend), then nothing is meaningful. I get that that's a more pragmatic/logical perspective but I believe that change starts small. So it's key to be very vocal about great things they we perceive as small because that can create ripple effects.
I worry when we bash people that do good things with some variation of "Good, But Not Good Enough!" [1] Because, it doesn't inspire people to do even better. In fact, it creates the opposite behavior "why should I even bother at all, can't win with these people."
It's, more or less, impossible for them to do worse than $0.
I get that there's some scenarios where they're not going to make money but the business can be viable as a lifestyle type business. But someone is buying this one for $4 million cash. So this isn't giving someone a company worth 0. This is handing out 800k+ in cash.
Of course they can. They can do $0 _and_ fuck someone else's life over out of spite, vindictiveness, or company policy.
I'm with all the other poster saying what General Catalyst, while almost certainly at least party for self interested reasons, deserve praise and respect for doing this. I know with certainly that there's a bunch of people reading here who'll now move a General Catalyst offer/termsheet right up the top of their pile sometime in the next few years. I hope this works out well for both General Catalyst and for future startups and founders who work with them.
There is a lot of money chasing those, and this is one great way to stand out from the crowd.
Alas, that is not at all true. I once sat through a presentation by a VC on how bad things can go, and they can possibly go much, much further south than $0. Lawsuits, crimes, and total time suck for years are some of the things that can go negative.
> It's, more or less, impossible for them to do worse than $0.
Every VC investment is a speculative bet on the future success of the company.
If Baremetrics sold for $800 million, they would have made 1000x their money.
If it was their only investment, then it would be a major fail but VC business model works by making 100 bets. Few bets deliver 1000x return but many of them are 100% loss.
The VC knew what they were doing and their $800k got them exactly what they paid for: an option to make a lot of money in case of a big future success.
That's why they gave Baremetrics $800k 5 years ago. Why they are giving the founder $800k today is far less clear.
> Why they are giving the founder $800k today is far less clear.
They aren't. They are just writing off their initial investment.
They lose $800K (which is less than that because it can be offset for tax purposes), not $1.6M.
If company grows 1,000 times, their stake also grows 1,000 times