Founders make good money when a VC funded company exits very rarely

Dragons:

A dragon is a company that returns an entire fund — a “fund maker.” VCs can have dragons in their portfolios just as LPs can have dragons in their portfolios.

Unicorns:

Many entrepreneurs, and the venture investors who back them, seek to build billion-dollar companies.

Decacorns:

Billion-dollar companies join a club of “unicorns,” a term used to explain how rare they are. But there are more than 50 of them now. There’s a new buzzword, “decacorn,” for those over $10 billion

Cartazonos:

The company where founders make significant money as well as investors.

According to Wikipedia: 

Unicorns are not found in Greek mythology, but rather in accounts of natural history, for Greek writers of natural history were convinced of the reality of the unicorn, which they located in India, a distant and fabulous realm for them.

The growing number of startups with unicorn valuations is leading many entrepreneurs to believe that they will be billionaires when their startup realizes the $Billion valuation externally, or when they get an “exit”.

Turns out the only time the founders get an exit that’s worth the effort is when all the stars align.

Here are 3 examples of good, bad and ugly.

1. Good: Cloudera’s funding resulted in founders (4) worth more than $250 Million in paper.

2. Bad: The cautionary tale of RedBus acquisition for employees and everyone but the founders.

3. Ugly: Get Satisfaction gets acquired by Sprinkr for < $50 Million after raising about $20 Million so far and the founders get washed out.

Gives you pause on the “headline” announcement for the huge fund raising that companies do.

If you are a founder and are looking to hit pay dirt, you will do that only when the exit is aligned with investor interests after their liquidation preferences and return restrictions.

 

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