Again, you're totally allowed to sell your company for $20 million dollars (or less) when the offer comes. If you're thinking about exits at all at the SEED FUNDING STAGE of your company, that offer is never going to come.
If you're thinking about exits at all at the SEED FUNDING STAGE of your company, that offer is never going to come.
If the maximum potential is $20 million, and we're talking about the VC-style go-big-or-go-home sort of business, I agree. A business that will be worth $20 million if everything goes right is likely to end up near zero. The distribution is non-normal and most companies don't reach 50 or even 25 percent of their maximum potential, but less than 1 percent. If the IPO option isn't at least open, try again.
On the other hand, I think people should be honest about all the possibilities. Choosing a path based on what happens for the winningest of the winners is a terrible idea (even though it's what a lot of people do, and why companies overpay their CEOs; overpaying executives is actually cheap when you consider how much harder the chumps work for the slim chance of reaching that level). Which is better, a 60% shot at a $20 million exit, or a 1% shot at $10 billion? Expected value (which VCs care about) says one thing and common sense says another.
If the maximum potential is $20 million, and we're talking about the VC-style go-big-or-go-home sort of business, I agree. A business that will be worth $20 million if everything goes right is likely to end up near zero. The distribution is non-normal and most companies don't reach 50 or even 25 percent of their maximum potential, but less than 1 percent. If the IPO option isn't at least open, try again.
On the other hand, I think people should be honest about all the possibilities. Choosing a path based on what happens for the winningest of the winners is a terrible idea (even though it's what a lot of people do, and why companies overpay their CEOs; overpaying executives is actually cheap when you consider how much harder the chumps work for the slim chance of reaching that level). Which is better, a 60% shot at a $20 million exit, or a 1% shot at $10 billion? Expected value (which VCs care about) says one thing and common sense says another.