I’m sorry, but FilmLoop was a feature at best. This is obviously, debatable, but ComVentures had to have seen this at some point and was privy to information that we don’t have about their market. *Of course* the founders are going to say that they still believe that they can make it work, that’s their jobs and founders will try to give life to something long after it’s dead. ComVentures got out when they could for the amount they could in order to cut their losses.

I used FilmLoop and liked it, but it was not a market-killer, it was barely a market-wanna-be and was mostly used by people that just really loved Web 2.0, not a mass market.

That being said, I’m bummed for anyone that has their dream crash on them, I hope the founders find something else soon because they clearly have good ideas, they just need to find the right, good idea.

@ SutroStyle

Regarding what advertisers are willing to pay, once you start dealing with larger agencies representing major advertisers, no one really looks at Alexa. We look at Comscore and we buy based on what types of audiences we’re aiming to reach. You can be a very small site and command very high rates if you have an influential audience or are more willing to integrate advertising in creative and innovative ways.

Something VERY similar happened at a company I was at in 2000. We received $10m in funding but then the VC got cold feet a few months later and decided to ‘merge’ our company with another company in their portfolio. Unfortunately, that other company was down in LA (we were in the Silicon Valley) and they weren’t even going to lay us off - they said we could have our jobs if we moved to LA. Ha! After a bit of negotiation, most of the employees were able to get a bit of severance but it was definitely an unpleasant experience that I won’t forget.

I’ve been at several venture-funded start-ups, but I’ve never been directly involved in the fundraising effort. Is it possible for companies to prevent this kind of behavior by putting certain stipulations into the funding contract? Maybe I’m just delusional because I’ve recently heard about some of the bizzarre (and unenforceable I’m sure) things that people are putting into their pre-nups these days.

Don MacAskill is absolutely right . . . Comventures did nothing wrong to seek a new direction for FilmLoop. . . be it to shut it down and take home the $3M in cash per the liquidation preference or continue to fund the company with an insider round. It has all the right in the world.. . as long as it explored all the options.

The sketchy (questionable legally?) part is to sell the company to a counterparty with a HUGE potential for conflict of interest WITHOUT shopping around for a fair valuation. The board has fiduciary duty to the common stockholders to TRY to maximize the value of his or her shares, even if the liquidation preference overwhelms the common stock value.

The outcome for the commons (founders + employees) probably would not have changed (ie no one got any money) but other preferred shareholders could have gotten more/some equity in another startup which might turn out to worth a lot . . . (just ask the epinion guys) . . . wonder why they didnt speak up . . .

That is heinous. Absolutely, positively HEINOUS. Bad show. I’ll make sure to avoid Fabrik and anything else from ComVentures. That’s just not concienable.

Talk about being WASHED OUT!

The sketchy (questionable legally?) part is to sell the company to a counterparty with a HUGE potential for conflict of interest WITHOUT shopping around for a fair valuation. The board has fiduciary duty to the common stockholders to TRY to maximize the value of his or her shares, even if the liquidation preference overwhelms the common stock value.

Quoted for emphasis.

unix.only, a little sensitive?

As I bootstrap away, I am mindful of the misalignment between VC and founder objectives. This does nothing to diminish my paranoia.

Wouldn’t it be tempting, I often wonder, for a VC to “cross pollinate” from a very promising and original venture to one or more A-teams that may be lacking in the creativity department, but boast pedigree and proven track records? Makes you wonder why they absolutely refuse to agree to confidentiality.

I can’t believe that it’s all about money these days

I can’t believe you guys. VC’s are nothing more than banks who are willing to take a chance. You go to a bank to get a mortgage, in return, you promise to make timely payments. You make the payments for two years and you stop. Bank takes back the house. Should you cry that the bank didn’t reward you for your diligence in paying them every month for two years?

The reason VCs are around is that they are willing to take a chance where banks wouldn’t. You come in with a plan and the good VCs may help bring in talent/connections to help achieve that plan. But when the plan turns sour, what do you expect them to do?

Also re: the sale to Fabrik. HOW is that evil? The company was sold for 3M… lets say the liquidation preferences was 1:1, so even if it was sold to Fabrik for say 10M, the founders would still get squat, since a liquidation preference of 1:1 means the VC’s get their money back first.

Over at VentureBeat, Roland Van Der Meer from ComVentures says the initial idea to sell was not ComVentures but another investor and that ComVentures didn’t have control. Also says FilmLoop couldn’t find a buyer.

One more comment. When you engage a VC with your venture, you’re basically betting on your startup being a big hit. There is no consolation prize. If you want some token reward for your hard work, stay with your current day job or bootstrap it yourself.

As an entrepreneur, I empathize with the employees who worked hard and saw their dream fade away. However, investment discipline requires that when the future looks bleak, you cut your losses early. As an employee, it’s better to spend 1year at a dead company than 3years at the same dead company.

The pain of this process, in my view, comes from the asymetry between VC employees(partners) and Company(employees). If the company does well, the VC personally makes as much as a senior exec. If the company folds (as a result of a foul $12M investment), the employees loose their job, struggle to make mortgage payments and daycare payments, while the VC continues to cash his $500K+++ salary. For those slow at math, that’s $20K every 2week, despite having made a stupid $12M investment. So for investors, or “financial intermediaries”, it’s a game of: face we win, tail you loose!

People see and feel this asymetry (or injustice) and feel it’s not fair. Entrepreneurs and VCs aren’t in this game together…unfortunately.

If LPs aligned the interests of intermediaries more appropriately, investment decisions would be more rational, and people (the fodder) would have more stable jobs.

Sounds like a sad tale but in this era of ROI’s, ROA, and any othe RO’s folks have to beware these things can happen.

Personally I believe in boot-straping, proving your model and then seek additional infusion if needed … at least then one will be in the better position to negotiate “out clauses” etc.

Thanks for the scoop Michael.

Don

Now here is a question for those of you who side with the vc’s.. agreeing with their process is like you are agreeing that they are doing a good job when they go investing. They are just poor souls trying to make a salary.. seriously..
Why would people put the vc’s in any other category. A bunch of kids trying to make a buck.. that’s the untold story here.
They are clueless about what technology and/or idea will be successful.. they are clueless about investments. Or why would the general pension fund return the small %’s they do..
Listen to this: the vc’s answer to why THEY fail is to blame it on the companies.. only 1 out of 10 makes it. Have you heard that before? Well, the full sentence should read:
Only 1 company out of the 10 WE invest in, makes it.
That is a totally different picture isn’t it. It reveals how good THEY really are..
Back to this story, a start-up is a start-up and there is risk involved. Investors know that from day one. At this level, ALL investors are willing to risk ALL their money.
There is no ifs or buts about it.
Now, who is the captain of the ship here? It is really important what s/he believes has happened. If there was only VC money invested, then they are scrwed forever. If there was any angel money involved, the captain should have the final say. (forget the legal hoopla.. that’s baloney.)
If s/he thinks there is value beyond the salvaging value the vc’s pulled out of it s/he needs to speak out. it’s that simple.

As an entrepreneur myself I just want to wish the FilmLoop guys the best of luck in the future. But it’s interesting that so many comments are berating the VCs here while most of the comments in the previous “FilmLoop Dead Pool” post was along the lines of “$11.5 million for a slide show?! WTF were the VCs thinking?”

I mean, sure, the founders got nothing, but the various VCs lost $8.5 million together, which is considerably less than nothing. Maybe the VCs could’ve handled it a little better, but let’s face it, the company failed. It had plenty of capital and exposure including getting very good coverage here on TechCrunch and being flogged on Guy Kawasaki’s own blog. But it wasn’t profitable, wasn’t in the top three in its small niche, and wasn’t going to raise anymore money. Requiring a download for a slideshow and no integration into social networking sites? Nails in the coffin. $8.5 million for 1 million registered users, that’s $8.50 per user. They might’ve done better by giving away $5 bills, which also wouldn’t have required a staff of 30. The VCs put in 8.5 big ones and I think they should keep the underlying technology, if for no other reason than to remind themselves not to invest so foolishly again.

With regard to the VCs actions, I dont see how this can possible be evil. First of all, the duty of the VCs is to increase the value for the fund investors and as members of the board, they also have the duty to increase long term share holder value of the company shareholders. Since the VC Fund is the company shareholder, the VC should act in the interest of the fund investors afterall.

If they find that it will generate value by selling out, there is nothing wrong in doing so, as long as it is legal. I dont see how selling out when an investment is not doing well is evil.

If this is evil, then I guess it is evil for us to sell shares of companies when they dont do well?

@Valley entrepreneur

The VC partner gets $500k because he/she isn’t just making one dumb $12 million investment. He’s making 9 dumb investments for every smart one. And he’s getting paid for that smart one, with money deducted for the dumb ones. If he made only (or even mostly) smart investments, he’d be Warren Buffet and be worth about $40 billion. Which at his current salary would require 80,000 years of work, not accounting for inflation. So it’s all fair.

That is why they are called “Venture Cannibals”

At least US investors actually understand that 9 out of 10 go bust and that VC investing is a higher risk than blue chip shares (the potential returns actually come with some risk). In Australia, you have to have a “sure bet” and be profitable day one to even get capital.

Great story Mike. Well done - this is why we keep coming back to Tech Crunch!

If VCs can judge me and other entrepreneurs based on an elevator pitch that goes for 30 seconds, then right back at you ComVentures. I have started a spreadsheet listing good and bad VCs and, guest what, ComVentures is listed in the bad. ComVentures, you deserve all the bad press that you get from this!

Here is what gets me. VCs are pulling out of a company and they think they are smart Because of that?? That is the most ridiculous thing I’ve heard.. Who gives money to VCs who act like that? Do they disclose their practices to Their investors?
When you make a commitment to a company you stick with it or you go down with it.
A lot of these so called VCs are going down faster than the companies they invest in, anyway..

there are some fundamentals to note in any consumer facing start up: (note, I’m not calling these lessons, because that would imply I have a clue about what did and didn’t go wrong here)

-partner with investors that have and appetite for, and have proven an ability to sustain a consumer facing endeavor
-if direct to consumer traction is taking longer than planned, get some partnerships to establish revenue
-make sure the investors are involved in strategy buy-in along the way - everyone should be on the same boat as much as possible
-make it happen as if there were a gun to your head, just make it happen. An old boss named Jim Flach used to say “Just Execute!”
-can’t get a huge win? Then get lots of small wins, they add up
-put on a mentality as though you have to do something remarkable every day
-stay up late
-get up early
-obsess with the success of the cause, always find an opening in the field

Are we seriously gonna believe the FilmLoop was sold for CASH VALUE and there were no conflict of interest? That whatever users they had was worth nothing? I personally would have bid $3M+5K . . . FilmLoop’s equity is worth atleast 5K

Now here is a question for those of you who side with the vc’s.. agreeing with their process is like you are agreeing that they are doing a good job when they go investing. They are just poor souls trying to make a salary.. seriously..
Why would people put the vc’s in any other category. A bunch of kids trying to make a buck.. that’s the untold story here.
They are clueless about what technology and/or idea will be successful.. they are clueless about investments. Or why would the general pension fund return the small %’s they do..
Listen to this: the vc’s answer to why THEY fail is to blame it on the companies.. only 1 out of 10 makes it. Have you heard that before? Well, the full sentence should read:
Only 1 company out of the 10 WE invest in, makes it.
That is a totally different picture isn’t it. It reveals how good THEY really are..
Back to this story, a start-up is a start-up and there is risk involved. Investors know that from day one. At this level, ALL investors are willing to risk ALL their money.
There is no ifs or buts about it.
Now, who is the captain of the ship here? It is really important what s/he believes has happened. If there was only VC money invested, then they are scrwed forever. If there was any angel money involved, the captain should have the final say. (forget the legal hoopla.. that’s baloney.)
If s/he thinks there is value beyond the salvaging value the vc’s pulled out of it s/he needs to speak out. it’s that simple.

Here is what gets me. VCs are pulling out of a company and they think they are smart Because of that?? That is the most ridiculous thing I’ve heard.. Who gives money to VCs who act like that? Do they disclose their practices to Their investors?
When you make a commitment to a company you stick with it or you go down with it.
A lot of these so called VCs are going down faster than the companies they invest in, anyway..

Vc’s are trying to portray the idea that there is a ‘magic bullet’ when it comes to a new idea or a start-up. I don’t buy that there is a magic bullet.
However, playing with other people’s money, blood and sweat is so easy.. that’s why they can only turn 10% (if that!) into winners.
Ideas and start-ups take a lot of hard work, dedication, trial and error etc.. that’s why they call it ‘research and development’.
You wouldn’t see articles like this in the traditional media. So glad to see this discussion here!
There is one major problem here.. these vc’s really have people with little or no experience, no vision – just kids (a lot of times, out school!), basically, posing gods because they have access to a checkbook..
The process is soooo broken..
I mean, think about it, you had a 10% success rate at what you do where would you be..
And to think that the VCs are saying that so easily.. I’d fire those guys in a sec just for saying it. So, if the VC tells you that THEIR success rate is 10% - just RUN away from them as fast as you can.

ComVentures did what they had to do. FilmLoop was in the dumper long before this maneuver. Remember, VCs have investors behind them that expect to see a return - they’re not charities.

The real lesson here is don’t deal with VCs unless you absolutely have to (IE: if you have a BS model like FilmLoop’s, don’t bother taking funding). And if you do deal with the VC, understand that things like this should be expected if you continue to underperform.

BS model? hmm.. how would one define that? let’s see: anything that doesn’t turn out the way you want.. would that qualify as a BS model?

Peter: I know some great AU VC’s, if you would like some pointers email me on nik at nik.com.au

There is this myth:
VCs are not charities. (therefore, they can justify doing even dumber things, like killing companies alltogether..)
What are they really?? Investors? I mean, 10% success rate??
I’d be curious to find out: what are these VCs who claim to have a 10% success rate?
I mean, don’t you really see that there is a problem here?

a vc firm exists only because of one reason: there is an investor who wants to take a high risk and take a shot at making a hefty return back.
This is our wonderful market: pay to play and in the process, invest in the society overall, to advance new ideas.

So these VCs are just brokers, intermediaries between the these people who sign checks and people who have an idea and actually are ready to work at making it happen.
Business models? That is a buzz word (wonder if it is not coming from VCs).
What was the business model of any new thing? It wasn’t.. because there was this new thing that never existed.. right?
So, forget about buzz words like ‘business model’. You build a thing and you sell it for a buck. That’s all there is to it – really.
So where does the VC come into play here?
Well, he know the guy with the checkbook..
Why, because that is basically what the vc ‘business model’ is: find the guy with the check book!
The problem here is that there isn’t an easy way to connect the guy with the check book with the guy with the idea of building a company and who wants to work hard at that..
There have been attempts at creating direct avenues.. connections between the guys with the checkbook and the entrepreneur out there.. but no major success so far.
Why, because these issues are never discussed in the media. So the guy with the checkbook things that mr VC (nice suite, corner office, view of the bay..) is so smart that s/he will take good care of his money.. right?
If there ever was a business opportunity this is IT:
Get rid of these VCs! Find a way to get the guy with the money to invest directly with the guy with the idea and ready to work hard for it. Not take the money and run!
‘Ideas’ anyone?

nm, you should start your own blog on VCs

#109: Tom

“Cross pollination” is a fact. Be careful while dealing with Redpoint.

trevo, thanks. there isn’t really much more to say..the numbers speak for themselves.. i don’t know how hitting 1 in 10 can be viewed by anyone with money to invest as a success..let alone one to pay for..
the fact that they choose to blame the companies they invested in is simply..deplorable.
killing them should simply be outlowed.. to use your analogy with the bank, you do not see banks starting destroying properties because payments were missed, do you..

acquiror?

There are so many things to comment on in this story its hard to know where to begin. So let’s start with the investment itself…

With every original Web 2.0 investment there seems to be five follow-ons. How many U-Tube rip offs can there be? What were once standalone websites are now being transformed into widgets… The fact is that VCs like ComVentures are not really looking for home runs. They’ve surrendered the clean-up spot to Benchmark, KPCB, and Sequoia. They are now hoping for triples and doubles… and really trying to not strike out in front of their limited partners.

ComVentures’ investment in Filmloop was neither insightful nor original - they looked at the competitive landscape and thought that they *might* be able to fund one of the video companies to a positive outcome.

We (like ComVentures) knew there were already companies doing similar things - and they were hoping for the company to be acquired by Yahoo… MSN… CBS… or some other media companies. When they saw that there may not have been a good outcome, the pulled the plug.

I suspect that we will see more and more of this as we see firms evaluate their portfolio companies against competitors to see if a positive outcome can be had. At the end of the day - with the drying-out of the IPO market - its a game of musical chairs, where acquirers are the chairs and we startups are trying to get a good seat.

It points to a complete lack of vision and originality on Sand Hill Road. ComVentures is not alone in their lack of vision. It will be fun to watch us keep score.

As far as Baris’ comments (BTW - what company has he ever funded that did well?) with regard to sensationalism… Maybe he should spend more time on portfolio companies than reading Tech Crunch, friend’s blogs, writing columns, and generally doing nothing. There is a reason he was asked to leave USVP - isn’t it interesting that ComVen picked him up?

Finally I do have to agree with some of the posts regarding VCs having the right to pull money out of failing companies. They have a job to do. Then again - so do the Meter Maids in San Francisco and no one likes them either.

checked out Baris Karadogan’s background - one could actually google it. Meter Maids in San Francisco you said? interesting comparison.

You can read his bio on the comven page. The point is that he is isn’t Michael Moritz - he can’t even hold Mortiz’ jockstrap.

re: Meter Maids… they are just doing their job when they write a ticket. VCs are just doing theirs when they pull funding.

We, as entrepreneurs, do a lot of due dilligence before launching a venture, but ultimately we are emotionally attached to our job/businesses.

VCs are just doing a job, which is money management.

mm obviously has some emotion invested in this. “Outlawing” VC’s from pulling the plug on hopeless ventures like FilmLoop is down right contra-capitalistic. That 3 mm in the bank didn’t belong to filmloop and filmloop didnt deserve it. Glad CV was able to recover some assets before it was too late.

As far as the employees and founders being unemployed the next day goes: that’s the nature of the game, if you want stability, SBC is always hiring!

I carefully read Roland Van Der Meer’s reply on the venturebeat.com and wonder what makes him think distorting facts is a good long-term strategy? I can not tell what actually happened in Nishan and Firefly cases, but regarding Filmloop at least four out of five “facts” he presented are not true. Now I feel sorry for Fabrik guys for having to deal with a “partner” like Mr.Roland Van Der Meer.

Ajay,
It seems to me that you are the one emotional here.. you are trying to put words in my mouth.. and refuse to look at the facts while trying to defend/justify a dubious act..
Not sure what your background is, but killing companies to grab their assets just because you might be able to do it.. should be outlawed..(if you really read my comments, that is what I said/meant). it is very rarely possible (read: legal) as it is.
Investors always have the option to sell their shares – they just need to find a buyer! – that comes into the discussion here. Investor not happy with the company? Go find yourself a buyer for your stake and get the heck out as soon as you can – that is your right and will always be.
Just because an investor has an interest in a company – even if that is a majority interest, doesn’t mean that they can go ahead and kill the company. A company is an entity by itself; there is a lot of value that goes into actually building a company – well beyond the investors’ money..
Back to this case, it is more than obvious that who made the decision to kill the company either had no clue about what to do to take it to the next level, or they were really pushing the legal issues there..
Just because a company goes through troubled times doesn’t mean that you have to kill it.. or there would be lots of major corpses/companies laying around.. just take a look at the auto and airline industries..

Filmloop was a great idea. Bravo for the VCs who took a chance on founders with great resumes and passion. I met the founders and execs mid-summer of last year, and had in-depth discussions about how to help them gain entry to massive communities (read: “large audiences”) with compelling value (read: “communities who would have a reason to use the service daily and spread the brand virally”).

I was surprised to find, after several extended meetings, a rather arrogant, insular and close-minded team, that somehow felt that they had it all figured out (in spite of amazingly obvious evidence to the contrary). I lost touch with them when they suggested that “bringing in interns” to investigate some of my ideas (interns with no experience) would be a better use of precious time. So they saved maybe $10,000 to $30,000 but lost four months. I think we can all see the results.

Lessons– 2:
1) Management needs to be held accountable by VCs and employees of start-ups to face product / adoption failure, and in fact to embrace it, with renewed energy and an open mind about how to “change direction” when folks who care (VCs) bring in experienced experts to help them succeed.

2) VCs can’t have so much on their plates that they leave a company like this (with direct competitors) to p*ss away $7 million before something becomes “urgent” enough to warrant “drastic” measures. Shame on the managemnt team, and shame on the VCs. This then might be part of the “real evil” of the participating VCs… they should not have allowed FilmLoop to drift so long, and should have intervened early enough to avoid this crash landing.

Cheers,

Matty

The board (and these vcs had someone on the board) can change the management team at any point in time when they believe that the team doesn’t deliver.
It didn’t sound like they saw a need for that.. right there, one can see major issues on how the board (including the vc on the board) exercised their fiduciary duty. They either believed that the management was doing a good job or they saw a need for change..
The presence on the board of directors of the vc that ended up placing the assets in another company, raises some of the most troubling questions in terms of what really happened there..very hard to show how the vc exercised his fiduciary duty for all ‘stakeholders’. The board very likely approved the strategic and operational plans as well.
they knew (or should have known) exactly what was going on..
blaming the management under these conditions is futile.. the board (including the vc) are responsible for the final outcome.

A VC does not have an obligation to keep stumping up the cash.

I wish the founders and employees the best with their next venture, and Im sure in a couple of years they’ll be happy having succesfully sold a company on their CV as opposed to a blow-out.

ComVentures probably did them a favour.

See link below on what Comven and Roland did to Nishan
http://www.byteandswitch.com/d.....c_id=43685

Another myth: A VC does not have an obligation to keep stumping up the cash.
Sounds pretty cliché doesn’t it..
Let’s put it this way:
You paid for your ticket and are ready to board the Titanic. Solid ship, solid captain that everyone trusts.
The Titanic starts its journey to the new world but it hits an iceberg along the way. Aboard the Titanic there is a small plane that could take two all the way to the Promised Land. Two people only.
The other You are the captain; you grab your girlfriend and jump on the plane saying:
The captain doesn’t have to go down with the ship. There are so many other ships out there and there is such a great need for captains like me that it doesn’t make any sense to stay with this ship that I cannot do anything to save from going down anyway..
As a matter of fact, I am doing everyone else a favor since they would probably be fighting to death for that two sitter..
Sound fair to you? Or should we call it “capitalistic”?
Oh, I tell you this: my father had paid for his ticket and put foot on the Titanic putting his life into the captain’s hands, my father died along the way and you took off with your girlfriend.. I got news for you.. Forget me trusting you with my life ever.. I’m coming after you with all I have..
Forget the myths and VC propaganda.
The story is pretty simple. The VC is an investor. An investor purchases a stake in a company. The investor doesn’t like the company any longer, guess what, the investor is free to sell his share.
The investor has no right to kill the company and take off with its assets.. even worse.. if the investor is on the board of directors, he has no right to coerce everyone else because he wants to ‘save his cash’.. No right. None!
Anyone tells you anything else, watch out..

mm. When you get an investor on board you discuss the terms. Part of the terms is who has control and how much. You are always free to tell the VC that no matter what, you have all the say, all the control. The VC is free to decide it that makes sense.

If the VC insists on terms that they will be able to pull their money out, you are free to tell them to go to hell. But if you agree, you can’t really blame them if they do what they do.

Its like if you buy a ticket and the fine print says: “If titanic hits an iceberg, captain and his partner will fly off in the plane. There are some lifeboats to fight over if you wish. Sail at your own risk. “. You are then free to decide if its worth going. The Filmloop founders are either naive (don’t blame them), or have just suddenly decided that its “not fair” (Assuming they’re the ones itching).

tr101,
When you pay (money, work, goods, etc.) for the ticket to get on the boat you know there could be problems along the way. BUT, There is a common understanding that the captain and its crew will make everything humanly possible to save the boat AND the people if anything bad happens.
You can put as much paperwork around that statement as you want. That is the truth and the paper will not change it.
Unfortunately, there is no other way to prove that they did everything they could, but for them to go down with the boat – if indeed they tried everything they could to save it and it was just not possible to find the best way forward for all on the boat – they all go down.
So, you got that wrong. The VC cannot control a company, no matter how much paperwork they try to burry you with. They want to. They create myths around the fact that they can. They even run propaganda machines to convince everyone that it’s their right to do so.
If in fact VCs want to have absolute control, it’s really easy to do so. They can have their sole proprietorship and then they can do whatever they please, hire and fire everything they dream of; it’s all theirs, no questions asked – this discussion would probably not take place if that were so. Or, why bother with any other companies since they already have one. Have everyone work for their company. Now they have the control you say.
In a Corporation world though, the board has the control. Everyone on the boat (Corporation) trusts that the board will fairly represent the interests of all stakeholdes. That’s why people pay for the ticket. They are all in the same boat ‘together’. Yeah, there are different classes but the destination is the same for everyone who pays for a ticket.
Interestingly enough, one of the myths out there is that VCs put their people on the board so that they ‘control’ the company.. To remind you how wrong that kind of thinking really is, go back and look and see what happened to the Enrons of the world.
Let me get on that plane first before the boat goes down. They could do it and they appeared that they had the controls to do it, so why wouldn’t they – this is capitalism after all, right?
Nope.. Sorry, no free lunch. Mr/Ms VC cannot have it both ways: s/he either invests in the company or s/he doesn’t. They might want to say to people ‘my money smells good while your thing (money, work, goods, etc.) stinks’ but that doesn’t make it so..
Notice that I am not discussing any details on how the deal was structured and how much money was still in the bank for this particular deal.
How the VCs pay for the ticket is a totally different story.
The problem with this case – which is the major trouble here – is that these VCs took off with the girl.. Got the assets from the company and parked them into their own garage – if I understood the story correctly – basically, telling everyone else that it was their right to do so.. it isn’t. and that smells and it smells badly..

Firstly, those of you not planning to pitch to ComVentures after reading this post, I am sure they will not miss you.

As hot as the startup scene is, even with the large flow of venture capital money, VCs are in the business to make money. A VC has to balance risk and return and in the process make some difficult decisions.

Yes it is unfortunate that they had to pull the plug but knowing what I know about FilmLoop, the company was over capitalized in the first place and blew through too much cash too fast. Blame it on bad investors or management but for this kind of cash, I would expect a larger business.

Finally let’s not forget, venture money is not free or just something a company can take for granted. Assume you had debt investors in your company with your house as security, would you as an entrepreneur blow through $13m without clear revenue and positive cashflow in sight.

So let’s get realistic, everyone is in the business to make money. This means balance risk and rewards and at time making tough decisions. So wake up and stop drinking the kool-aid folks.

Zaboo,
Are you suggesting that the ‘entrepreneur’ made the decision to blow through $13M without board’s approval? Without VCs nod?
Without everyone – including the VC on the board – having full knowledge and understanding of the risks involved? No plan, nothing? Or that the VCs were not aware of all these risks when they made the decision to invest?
What do you really mean when you say:
“would you as an entrepreneur blow through $13m without clear revenue and positive cashflow in sight.”
? Please, Illuminate

epinions, dealtime, shopping.com

http://www.thealarmclock.com/m.....isled.html