[pdshrader]

This "third way" is only really possible if you're strategically aligned with the "one round" investors you have. It's easy to point to a few companies that have gotten buy-in from their investors and generated a multiple of 100x returns, but for the vast majority of companies that raise one round, their investors are still going to push for "swing for the fences" returns - which usually means recommending raising more money.

Consider:

- Venture capitalists are generally funded with a 2% management fee and a 20% carry. AKA their limited partners (investors in the VC fund) are looking for returns over 10 years that are better than an index fund, even burdened by those extra fees. In other words, they've only achieved the most modest of success if they have a 3X overall average return, and are incentivized by the carry to aim for much much higher returns.

- VCs only make money if they can sell the shares. I.e. there's an M&A event, an IPO, or a secondary market.

- Even without a majority share, VCs generally get "preferred share" rights, which include the ability to force a company to have a public offering/sell itself (These are called "registration rights" in the Investor Rights' Agreement). Granted these haven't been used frequently in the last decade and a half, but it's a potential hammer that VCs can wave if a founding team/management decide to try to just run a company as a smaller profitable enterprise.

[siegel]

On the last point, that is why it is CRITICAL that you do not give your investors the right to demand registration based on the mere lapse of time. In most rounds I do, I get investors to agree that demand registration only arises after an IPO. It looks like a small point. But it is essential if you want to keep your options open (which is really what the Saastr article is about).

[reducesuffering]

I'm going to guess that the typical VC model of 2% and 20%, only hockey-stick mega-exits, is generic, milked to death, and alpha eliminated. Early Silicon Valley VC got its huge returns being innovative from the typical Wall St. NYC banking firms, at a time when early software projects needed capital for servers and big offices. Now, it's a standardized banking apparatus and the software co. landscape has changed. VC itself will get disrupted by the smarter financiers taking advantage of the alpha here, filling the gap by making more, smarter % return allocations into overlooked software co's that don't need $200m for a software co. in a remote-work cloud infra world.