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patio11's profile
Patrick McKenzie
Patrick McKenzie
Patrick McKenzie
@patio11

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Patrick McKenzie

@patio11

I work for the Internet, at @stripe, mostly on accelerating startups. Opinions here are my own.

東京都 Tokyo
kalzumeus.com
Joined February 2009

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    1. Patrick McKenzie‏ @patio11 5 Oct 2019
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      Patrick McKenzie Retweeted Jeff Morris Jr.

      Your periodic reminder: charge more. I feel pretty ambivalent about valuations, by which I mean that 2019 will clearly be lowest valuation for early software companies compared to year X and all years later in human history, and I don’t know whether X is 2020 or 2025 or 2030.https://twitter.com/jmj/status/1180525455973076992 …

      Patrick McKenzie added,

      Jeff Morris Jr. @jmj
      Fundraising rounds in 2019: Friends & Family: $1M on $8M post Pre-Seed: $2M on $12M post Seed: $4M on $18M post A: $10M on $40M post If you have a fund, it’s okay to slow down your investments. Time diversification for portfolios matters & prices won’t stay this high forever.
      3 replies 6 retweets 117 likes
    2. SundayTedium‏ @SundayTedium 5 Oct 2019
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      Replying to @patio11

      I can't understand a single word in this whole convo

      1 reply 0 retweets 1 like
    3. Patrick McKenzie‏ @patio11 5 Oct 2019
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      Replying to @SundayTedium

      That’s fairly normal when one listens to a specialist talking to other specialists. In this case, it’s a narrow segment of industrial finance which for structural reasons is extremely important in the tech industry. The quick version, or Google “pre post money valuation”:

      1 reply 0 retweets 2 likes
    4. Patrick McKenzie‏ @patio11 5 Oct 2019
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      Replying to @patio11 @SundayTedium

      Suppose an investor wants to invest in a company, giving them money now in exchange for earning hopefully more money later contingent on them growing successfully. They and the company have to agree on a) how much money and b) how much of the company they are buying.

      1 reply 0 retweets 1 like
    5. Patrick McKenzie‏ @patio11 5 Oct 2019
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      Replying to @patio11 @SundayTedium

      (There are a lot of other factors, but for comprehensibility the best investors and the best companies converge on an equilibrium where many of those factors are much less salient.)

      1 reply 0 retweets 0 likes
    6. Patrick McKenzie‏ @patio11 5 Oct 2019
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      Replying to @patio11 @SundayTedium

      Round numbers to make things easy: suppose an investor offers to pay $1 million for 10% of the company. If you notionally extended this to them buying 100%, which is not on the table, that would cost $10 million. That is the “valuation” of the company.

      1 reply 0 retweets 1 like
    7. Patrick McKenzie‏ @patio11 5 Oct 2019
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      Replying to @patio11 @SundayTedium

      Venture capital (VC, this segment of finance) describes valuations in one of two ways, historically because there are some people you want to describe valuations as low to (people giving you money) and some you want to describe them as high to (people you give money to).

      1 reply 0 retweets 0 likes
      Patrick McKenzie‏ @patio11 5 Oct 2019
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      Replying to @patio11 @SundayTedium

      If you end up owning 10% of a company for $1M, that is the “post-money (or post) valuation. Since the company is worth $10M *with your money in it*, the “pre-money” valuation is notionally $9M. If you and a friend are in the know, you can say “I got in $1M at $9M pre.”

      2:20 PM - 5 Oct 2019
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      • Wilson Silva Till Ulen Michael(マイケル)@Sydney 3/14-??? bendodge
      1 reply 0 retweets 5 likes
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        2. Patrick McKenzie‏ @patio11 5 Oct 2019
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          Replying to @patio11 @SundayTedium

          Back to the gamesmanship aspect, of an entrepreneur says “I think my company is worth $15M” and a VC says “We agree, we would happily invest $3M at a $15M post-money valuation”, the entrepreneur may think they just got what they wanted but probably didn’t. This happened a lot.

          1 reply 0 retweets 5 likes
        3. Patrick McKenzie‏ @patio11 5 Oct 2019
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          Replying to @patio11 @SundayTedium

          The other jargon words are for stages of fundraising a company goes through and the slightly different constellation of investors who invest at those stages. Broadly they start “Small investors putting small money into very risky companies with few proof points.”

          1 reply 0 retweets 1 like
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