You can do it alone

Re:You can do it alone by marcamillion on Sunday November 18, 2012 @03:44AM (#4800236)

I am curious, Ryan says: > This is also why I don’t ever want to take Treehouse public. I hate the idea of having to answer to outside investors who don’t have day-to-day knowledge of the challenges and opportunities we face. They also don’t share the insane passion that I have for the business.

But Treehouse has raised $5M. How did that work? What outcome are those investors looking for?

If you didn't want to go public, then what did you sell the investors on? Seems to me that you are weakening your hand - because any potential acquirer knows that your options are limited because you don't want to go public.

What's the point of publicly disclosing something like that?

Given that VC investing is a hits driven business, I can't see any rational investor being satisfied with you not swinging for a large outcome for them.

Given that you own 70% of your company, if we make the simplistic assumption that you sold 30% for $5M - which would give you a $16M post-money valuation...you would have to sell to Google or some other deep pocket for almost $40M just for them to double their money. Assuming this doesn't happen for 5 years, those returns look paltry.

What is the end game for them?

P.S. If you never told them that you didn't want to swing for the fences, then this must be a sucky way for them to find out.

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Re:You can do it alone by millennia on Sunday November 18, 2012 @07:36AM (#4800469)

An exit is not the only way for a company to return money to investors. If it makes money it can pay the a steady stream of dividends.

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Re:You can do it alone by rpm4321 on Sunday November 18, 2012 @05:48PM (#4801977)

As a practical matter, how would this work?

Wouldn't there have to be a fair amount of upfront and unique legal legwork to put something like this in place? Would the investors be guaranteed a certain percentage of any money Carson takes out of Treehouse?

I'm pretty much allergic to the idea of answering to a board, shareholders, and and analysts myself. 37 Signals seems to have an interesting idea about how to compensate employees in the unlikely case of a liquidity event, but some sort of structure that would allow profit sharing, without requiring a path to IPO or acquisition would be great: http://37signals.com/svn/posts/2987-an-alternative-to-employ...

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Re:You can do it alone by marcamillion on Sunday November 18, 2012 @07:20PM (#4802227)

As far as I understand it, that's not the premise that VCs invest in.

Private Equity firms, on the other hand, do this. They buy into companies, so they can share in the cash spoils. That's why they tend to buy companies that have strong cash flows - like GoDaddy, or Utility Companies, etc.

But VCs - especially tech VCs - usually only invest with on the premise that there will be a liquidity event. In fact, it is built into most term sheets - the liquidity terms.

Paying a VC out of the cash generated by a company goes against the notion of a high-tech, high growth company. Companies take outside cash so they can invest in the company and keep growing - because that's how you get the best bang for your buck. It usually doesn't happen the other way around.

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