Comment by quietthrow
4 days ago
This. To me if you are still unprofitable after 15 years you are not really a business.
However genuinely curious about the thesis applied by the VC’s/Funds that invest in such a late stage round? Is it simply they are taking a chance that they won’t be the last person holding the potato? Like they will get out in series L or M rounds or the company may IPO by then. Either ways they will make a small return? Or is the calculus diff?
The last person in usually gets the best deal, in that they can get preference and push everyone else (previous investors, founders, and employees) down. If things goes south, they get their money out before anyone else.
Isn’t everyone “the last” at the moment they are taking participation in the round? If someone thinks they’re gonna get preferential treatment in Series C or D, and then comes someone in E with preferential treatement, then
Why don't early investors put clauses in their investment to protect themselves against being screwed over by later investors? It seems like an obvious thing to ask for if you're giving someone a lot of money, so I'm assuming there must be a very good reason it's not done.
Early investors (the main ones at least) usually get pro-rate rights - which means you can invest in later rounds to maintain your ownership percentage (i.e a later round dilutes your ownership, so you invest a bit until the ownership stays the same).
But the pref stack always favors later investors, partly because that's just the way it's always been, and if you try to change that now no one will take your money, and later investors will not want to invest in a company unless they get the senior liquidity pref.
The VCs should, they're called anti-dilution measures
Its less financially/legally saavy parties like angel investors and early employees who (sometimes) get screwed out of valuation
> However genuinely curious about the thesis applied by the VC’s/Funds that invest in such a late stage round
1) It's evaluated as any other deal. If you model out a good return quantitatively/qualitatively, then you do the deal. Doesn't really matter how far along it is.
2) Large private funds have far fewer opportunities to deploy because of the scale. If you have a $10B fund, you'd need to fund 2,000 seed companies (at a generous $5m on $25m cap). Obviously that's not scalable and too diversified. With this Databricks round, you can invest a few billion in one go, which solves both problems.
I guess making a quick buck pre-IPO? It's essentially lending cash on loose terms.
Why they do it via an equity offering and not debt is unclear. You'd imagine the latter is cheaper for a hectocorn.
Anchoring IPO expectations and hype. 100B valuation is useful.