Month: January 2017
Fred Wilson has a spectacular post up on how VC funds should think about reserves. It’s even more valuable to entrepreneurs so they can understand how the best VCs think about reserves, giving the entrepreneurs ammunition to ask their investors how they are thinking about reserves.
I only noticed one thing missing from Fred’s post which is a statement about cashflow which I commented on.
“Fred – phenomenal. The only thing I noticed missing was a comment on fund cash flow. To recycle, you have to have the cash flow. If you don’t have the exits to generate funds to recycle, you can hit a cash flow wall where your reserve model breaks (since you don’t have the cash to fund the reserves.) There are several solutions to this, including recalling capital, having an annex fund, and suspending management fees, but the best is having the cash in the first place …”
In addition to the post being great, the comments have a lot of rich stuff in them as well.
Scott Belsky has a great post up titled Don’t Get Trampled: The Puzzle For “Unicorn” Employees. In it, he’s got a bunch of questions, along with detailed discussion, that you should ask your potential employer if you are considering a job at a unicorn (company with > $1b private valuation.) His suggestion is to strongly “audit your comp” in advance.
The questions include:
- Have you raised capital with liquidation preferences, and what are they?
- How many months of runway do you have?
- If you need to raise more money but are unable to do so at standard terms, will you accept less favorable terms or will you raise at a lower valuation?
- Has the company taken on debt?
- Does the company aspire to be a public company?
- If the company’s plan is to stay private for the foreseeable future, have there been secondary sales for employees and/or founders?
- Have the company’s financials been audited?
I encourage you to read the whole post at Don’t Get Trampled: The Puzzle For “Unicorn” Employees.