"for less than they had raised" - that's actually not true and sloppy journalism from the journalists that wrote it.

If you look at North's funding - the difference between the suspected purchase price of $180M and what they raised ($200M) is a $24M loan they received from the government of Canada [1], which was called back shortly after (because of layoffs) [2].

The remaining $4M difference is probably interest on a standard debt financing loan of $40M they received [3] and some rounding error in the $180M suspected purchase price.

It seems Google bought them for the exact amount raised, in both debt and funding.

[1] https://www.itworldcanada.com/article/north-receives-24-mill...

[2] https://www.therecord.com/business/2019/02/22/federal-govern...

[3] https://www.crunchbase.com/organization/north-8daa/company_f...

North's performance didn't beat inflation. It's worth less today than the money it raised in the past.

Ok, but, like, that's a rounding error. They were acquired for what they raised, to within a rounding error.

And as they say in Vegas, a push is a win.

Sorry for the quibble, but it's only a win in Vegas because the expected value in Vegas is negative due to the house edge. The expected value of human effort is typically positive, so a push is not a win in the development of companies.

The expected value in tech startup investment is also negative, I'd suggest. Just like Vegas, all the rational players are really just gambling on the 100x jackpots, and all the "dreamers" who believe and double/triple down on their ideas that never make a profit - fund the whole game.

> The expected value in tech startup investment is also negative, I'd suggest. Just like Vegas, all the rational players are really just gambling on the 100x jackpots

Expected value is precisely the quantity that says that the value of a 3% chance of 100x returns is a 3x return. Also, how can you say that the expected value of investment is negative, but that the rational players are gambling at all? Perhaps you mean that the 3% chance of 100x (or whatever) is irrational for the founders, which may be true, but that isn't really what your words say.

Sure, but "3% chance of 100x returns" is firmly in "dreamer" territory. Best guess I can find is that it's at least an order of magnitude smaller than that:

https://angel.co/blog/what-angellist-data-says-about-power-l...

A 0.3% chance of a 100x return is a 70% loss. (And over 10 years, a 3x "return" is pretty much just breaking even anyway)

The "rational players" in this game are the VCs who're raking 2%/year from the investors in their funds (whether they succeed or not), and also skimming their 20% liquidity event bonus - so they benefit from the winning funds without ever having any personal financial risk in all the losing funds.

In my opinion, pretty much every other tech startup investor could be categorised as one or more of 1) Dreamers (who genuinely believe _this_ one is going be "their unicorn!!!"), 2) Lottery players (throwing away a hopefully insignificant enough amount of money to them, in return for the entertainment of maybe winning big one day) 3) Horse race gamblers (someone who believes they're better informed than 99% of the other investors in their chosen horse/jockey/startup/founder) 4) early stage employees who wittingly or unwittingly accepted vesting options as part of their renumeration (these are arguably somewhere on the spectrum between #1 and #2) or possibly 5) insider traders (pretty much a legally actionable case of #3).

(And I say this with the hindsight of having been the first four of those - some of them several times over...)

I don't think #5 exists for private companies.

it really should only be considered a win if and only if employees actually get any money from their stock options.

From what I've been told they didn't. Only the founders managed to get anything out of the sales, plus took pretty lavish salaries while the company was operating (a lot of it from government subsidies).

Given that analogy, I'm curious how a VC would view this kind of exit. Is breaking "even" seen as some kind of success given the higher failure rate for venture backed companies?

I suspect a push is a VC failure.

A friend of mine was CTO as a startup that raised like $100 million. They knew it was gonna flop after a while, and wanted to wind the company down and return 50% of the VC’s money. The VC told them to take extreme risk and/or drive the company into the ground before returning the cash. A 100% loss was expected, but a 50% loss was somehow an embarrassment.

Pretty sure PG has talked about this and said something to the effect that all of their money is made on the extreme outliers rather than the ordinary failures or modest successes. Knowing that, it kinda makes sense that they'd rather see the startup push and try to go big rather than just going home.

Well, it depends on the numbers involved. If they estimated a 5% chance of getting $2 billion, then that would be a 2x expected return on a $50 million cost, which is entirely rational for investors with huge pockets. But if they estimated a 1% chance of getting $2 billion, then that's a 0.4x expected return (an expected loss of $30 million), which is irrational, unless the "embarrassment" is a significant factor for the VCs, and that would be interesting.

Yes, that's a fair point--the numbers for the potential upside and downside matter a lot here. I was only trying to make the case that in some cases, the downside risk may not hold a candle to the potential upside.

I also think that they want to see founders who are willing to charge up those hills rather than to shirk away from challenges that seem to be too big for them. Sort of like burning your ships behind you in terms of morale--if it's go big or go home and you can't go home, there's only one choice left.

Supposedly for a VC it is a bit better to liquidate at break even than to limp along with an uncertain future, because VCs no longer have to spend time going to board meetings.