No Exit, the new book from Gideon Lewis-Kraus, should be required reading for anybody who thinks it might be a good idea to found a startup in Silicon Valley. It shows just how miserable the startup founder’s life is, and raises the question of why anybody would voluntarily subject themselves to such a thing.
Ben Horowitz has a great guide to the dreaded “down round” today — that unloved point in the evolution of a venture-backed technology company when it’s forced to raise money at a lower valuation than it received in previous rounds. Certainly, such things shouldn’t be unexpected. As he explains:
Dan Primack is awesome when he’s angry, and boy is he angry today, reacting to the news that Snapchat’s two co-founders have cashed out to the tune of $10 million apiece as part of its latest funding round. “This is desperate lunacy,” he writes, adding that these kind of deals “should scare the hell out of venture capitalists”:
I read quite a lot of papers about finance and investing, but I can’t remember the last time I came across a 52-page paper which I simply devoured, avidly, reading every word, and even following the footnotes. But such is the latest publication from the Kauffman Foundation, a truly wonderful report on the foundation’s own experiences in the world of venture-capital investing. This is required reading for all institutional investors with any kind of exposure to VC, and I sincerely hope that it succeeds, at least at the margin, in forcing those institutional investors to behave a bit more like investors, and a bit less like chumps being bullied into throwing millions of dollars into a series of opaque black boxes delivering decidedly subpar returns.